Sale of Goods Act, 1930 – Economic, Business and Commercial Laws Important Questions

Sale of Goods Act, 1930 – Economic, Business and Commercial Laws Important Questions

Question 1.
Define ‘Goods’ as per the Sale of Goods Act, 1930.
Answer:
As per Section 6 of the Sale of Goods Act, 1930, goods form the subject matter of a contract of sale. Hence, it is necessary to know the meaning of the term ‘goods’.

Goods [Section 2(7)]: Goods mean every kind of movable property other than actionable claim and money. It includes stocks & shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be served before the sale or under the contract of sale.

Goods include:

  • Movable property
  • Trees which are agreed to be
  • Stocks served before the sale
  • Shares
  • Animal & birds
  • Computer software
  • Lottery tickets
  • Advance license
  • Coins of antiquity
  • Jubilee coins

Goods do not include:

  • Actionable claims
  • Current money
  • Land
  • Standing trees
  • Immovable property

Question 2.
Write a short note on Contingent goods
Answer:
Contingent Goods [Section 6(2)]: When the acquisition of the goods depends upon the happening or non-happening of future uncertain events such goods are known as contingent goods. In the case of contingent goods, the contract operates as a “contract for sale” of goods.

Example: X, a fisherman agrees to sell fish to Y that may be caught in the sea. Getting fish in the sea is an uncertain future event. Here fish is contingent goods.

Question 3.
Distinguish between: Future Goods & Contingent Goods
Answer:
Following are the main points of distinction between future goods and contingent goods.

Points Future Goods Contingent Goods
Meaning Goods that are not possessed by the seller at the time of contract of sale but will be manufactured or produced or acquired by the seller, after the contract of sale are known as future goods. When the acquisition of the goods depends upon the happening or non-happening of future uncertain event such goods are known as contingent goods.
Uncertainty There is no uncertainty in the case of the acquisition of future goods. There is uncertainty in the case of the acquisition of contingent goods.
Scope Future goods do not include contingent goods. Contingent goods include future goods.
Effect of contract In the case of future goods, the contract operates as an “agreement to sell” the goods. In the case of contingent goods, the contract operates as a “contract for sale” of goods.
Example X makes a contract with Y, a farmer to purchase all wheat produced in his field during a season. At the time of making the contract, Y was not in possession of wheat, so it is future goods. X, a fisherman agrees to sell fish to Y that may be caught in the sea. Getting fish in the sea is an uncertain future event; hence fish in this case is contingent goods.

Question 4.
State briefly the essential elements of a contract of sale under the Sale of Goods Act, 1930.
Answer:
Essentials of the contract of sale:
1. Two parties: There must be two parties; seller & buyer. A person cannot buy his own goods. The sale has to be made to another person. However, there may be a contract of sale between one part-owner and another.

Example 1: X and Y are part-owners. X renouncing his right to give the whole property to Y for consideration. This is a sale by X & Y to Y.

Example 2: Distribution of goods among partners on dissolution is not a sale because they are undivided joint owners of the goods. Example 3: Partner can buy goods from the firm or sell goods to the firm.

2. Transfer of ownership: In case of ‘sale’ property in goods is immediately transferred from seller to buyer. In the case of ‘agreement to sell’, the transfer of property is to take place in the future.

3. Subject matter: The subject matter of a contract of sale must be goods.

4. Consideration: Consideration in a contract of sale should be ‘money to the seller and ‘goods’ to the buyer. However, the consideration may be partly in money and partly in goods.

Example 1: X contract to sell 100 mobiles to Y for 13,500 per mobile. This is a contract of ‘sale’.

Example 2: X contracts to sell 100 mobiles to Y, if Y gives 100 calculators and ₹ 3,000 per mobile. This is a contract of ‘sale’.

Example 3: X contracts to sell 100 mobiles to Y if Y gives 700 calculators. This is ‘barter’ or ‘exchange’ and not a contract of ‘sale’ because goods are offered in return for goods.

(5) Other essentials of a valid contract: All other essential elements of a valid contract viz. free consent, the legality of an object, competency of parties should also be present.

Question 5.
Distinguish Between: Sale And Agreement To Sell
Answer:
Following are the main points of distinction between sale and agreement to sell:

Points Sale Agreement to sell
Meaning II the property in the goods is immediately transferred from the seller to the buyer, it is called a sale. If the property in the goods is to take place at a future time or subject to fulfillment of some condition it is called an agreement to sell.
Type of contract It is executed contract. It is an executory contract.
Type of goods In ‘safe’ goods are specific & ascertained. In ‘agreement to sell’ goods are future & contingent.
Rights Sale creates a right in rem. (right against the whole word) Agreement to sell creates a right in personam. (right against a specific person)
Risk In ‘sale’ property in goods transferred to the buyer, so buyer bears the risk of loss, even if. In ‘agreement to sell property in the goods is to take place at a future time or subject to fulfillment of some condition, so seller continues to bear the risk.
Example X agrees to sell 100 bags of wheat to Y which are ready for delivery. This is a contract of ‘sale’. X, a farmer makes a contract with Y to sell all wheat produced in his field during a season. This is a contract of ‘agreement to sell’.
Sales tax A ‘sale’ is liable to sales tax. An ‘agreement to sell’ is not liable to sales tax.
Rights of buyer In ‘sale’ if the buyer has paid price, he can sue the seller for non-delivery of goods. In ‘agreement to sell’ if the buyer has paid price, he cannot sue the seller for non-delivery of goods. He can sue for damages only.
Breach of contract by the buyer In ‘sale’ if there is a breach of contract by the buyer, the seller can:

(a) Sue for the price of goods even if goods are in his own possession
(b) Resell the goods
(c) Exercise right of lien
(d) Exercise right of stoppage in transit.

In ‘agreement to sell’ if there is a breach of contract by the buyer, the seller can sue only for damages and not for the price.
Breach of contract by the seller In ‘sale’ if there is a breach of contract by the seller, the buyer can:

(a) File a suit for damages against the seller.
(b) File a suit for delivery o! goods.

In ‘agreement to sell’ if there is a breach of contract by the seller, the buyer can sue only for damages.
Insolvency of buyer In a ‘sale’ if the buyer becomes insolvent seller must give the goods to the Official Assignee/ Receiver. The seller can claim only a rateable dividend for the price of goods. In ‘agreement to sell’ if the buyer becomes insolvent, the seller is not under obligation to give the goods to the Official Assignee/ Receiver.
Insolvency of seller In a ‘sale’ il a seller becomes insolvent Buyer can claim the goods from the Official Assignee/ Receher. In ‘agreement to sell’ if the seller becomes insolvent buyer can claim only a rateable dividend for the price paid from the Official Assignee / Receiver.

Question 6.
Distinguish between: Sale and contract for work and labor
Answer:
Following are the main points of distinction between sale & contract for work and labor:

Points Sale Contract for work and labor
Meaning If the property in the goods is immediately transferred from the seller to the buyer, it is called a sale. It is a contract for executing certain work and involves the exercise of skill.
Effect In ‘sale’ there is delivery and transfer of ownership of goods by the seller to the buyer. Contract for work and labor involves the transfer of some material and exercise of skill and labor in goods belonging to another person.
Examples (1) X agrees to sell 100 bags of wheat to Y which are ready for delivery. This is a contract of ‘sale’.

(2) A dentist agreed to supply a set of artificial teeth to a patient. The entire material found by a dentist. It was held that it contract of ‘sale’.

(3) X contracted for sale of a fur coat of special design and color as per customer’s requirement. This is a contract of ‘sale’.

(1) X gives his old car to Y for repair and also requests to replace some old parts. This is a contract for work and labor.

(2) X, an artist, agreed to paint a picture of Y. Y supply canvas and other material. This is a contract for work and labor.

(3) X gives a gold biscuit to Y, a goldsmith, to make ornaments and deliver back to Y for ₹ 2,000. This contract for work and labor.

Question 7.
Distinguish between: Sale & Hire purchase
Answer:
Following are the main points of distinction between sale & hire purchase:

Points Sale Hire Purchase
Meaning If the property in the goods is immediately transferred from the seller to the buyer, it is called a sale.
If price is allowed to be paid in installment, but the property (ownership) in goods is transferred immediately, it is a ‘sale’.
Hire purchase is a contract in which goods are delivered and the price is allowed to be paid in installments on the condition that property (ownership) in goods will be passed only on payment of all the installments.
Act The Sale of Goods Act, 1930 The Hire Purchase Act, 1972 (Repealed)
Position In ‘sale’ buyer becomes the owner of the goods. Hire purchaser is only a bailee until pays all the installments.
Termination The buyer can not terminate the contract. The hire purchaser has an option to terminate the contract.
Resale buyer/ hire purchaser If the buyer had not paid full price and sells the goods to a third party for a value, who are acting in good faith, will get a good title. If the hire purchaser had not paid all the installments sells the goods to a third-party contract, then the third party would not get a good title, since the hirer himself had no title to goods.
Default by buyer/hire purchaser If the buyer makes default seller can

(a) Sue for the price of goods and
(b) Exercise right of lien.

If the hire purchaser makes default the seller can take repossession of the goods.

Question 8.
Sale and Bailment [Dec. 2019(3 Marks)]
Answer:

Points Sale Bailment
Meaning If the property in the goods is immediately transferred from the seller to the buyer, it is called a sale. Bailment is the delivery of goods, by one person to another, for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of, according to the instructions of the person delivering them.
Consideration In a contract of sale, there is consideration to both parties. A contract of bailment may be entered without consideration. This happens in gratuitous bailment.
Return of goods In a contract of sale, the buyer is not required to return the goods. In the contract of bailment, the bailee has to return the goods after the purpose is over.
Risk Risk follows ownership and hence in case of a contract of sale risk of goods with the buyer. In a contract of goods, ownership is with the bailor as only possession is transferred to the bailee and hence the risk of goods is with the bailor.
Act Contract of sale has governed the Sale of Goods Act, 1930 Contract of bailment is governed by the Contract Act, 1872.

Question 9.
With a view to boosting the sales Hanuman Automobiles sells a motorcar to Mr. A on a trial basis for a period of three days with a condition that if Mr. A is not satisfied with the performance of the car, he can return back the car. However, the car was destroyed in a fire accident at the place of Mr. A before the expiry of three days. Decide whether Mr. A is liable for the loss suffered.
Answer:
Facts of Case: With a view to boosting the sales Hanuman Automobiles sells a motorcar to Mr. A on a trial basis for a period of three days with a condition that if Mr. A is not satisfied with the performance of the car, he can return back the car. However, the car was destroyed in a fire accident at the place of Mr. A before the expiry of three days.

Provision: As per Section 8 of the Sale of Goods Act, 1930, where there is an agreement to sell specific goods, and subsequently without any fault on the part of the seller or buyer the goods perish or become so damaged as no longer to answer to their description, the agreement is thereby avoided. Thus, the contract becomes void.

In the given case that the subject matter of the contract Le. Motorcar was destroyed before the transfer of property from the seller to the buyer. As no ownership is passed on to the buyer, the risk is also not passed on to him. The ownership and risk are still with the seller (ie. Hanuman Automobiles).

Conclusion/Decision: Therefore, in the present case Mr. A is not liable for the loss suffered due to the fire accident over which A has no control. Hanuman Automobiles will have to bear whatever loss that has taken place due to the fire accident.

Question 10.
Distinguish between: Sale and agreement to sell [Dec. 2018 (3 Marks)]
Answer:
Following are the main points of distinction between sale and agreement to sell:

Points Sale Agreement to sell
Meaning II the property in the goods is immediately transferred from the seller to the buyer, it is called a sale. If the property in the goods is to take place at a future time or subject to fulfillment of some condition it is called an agreement to sell.
Type of contract It is executed contract. It is an executory contract.
Type of goods In ‘safe’ goods are specific & ascertained. In ‘agreement to sell’ goods are future & contingent.
Rights Sale creates a right in rem. (right against the whole word) Agreement to sell creates a right in personam. (right against a specific person)
Risk In ‘sale’ property in goods transferred to the buyer, so buyer bears the risk of loss, even if. In ‘agreement to sell property in the goods is to take place at a future time or subject to fulfillment of some condition, so seller continues to bear the risk.
Example X agrees to sell 100 bags of wheat to Y which are ready for delivery. This is a contract of ‘sale’. X, a farmer makes a contract with Y to sell all wheat produced in his field during a season. This is a contract of ‘agreement to sell’.
Sales tax A ‘sale’ is liable to sales tax. An ‘agreement to sell’ is not liable to sales tax.
Rights of buyer In ‘sale’ if the buyer has paid price, he can sue the seller for non-delivery of goods. In ‘agreement to sell’ if the buyer has paid price, he cannot sue the seller for non-delivery of goods. He can sue for damages only.
Breach of contract by the buyer In ‘sale’ if there is a breach of contract by the buyer, the seller can:

(a) Sue for the price of goods even if goods are in his own possession
(b) Resell the goods
(c) Exercise right of lien
(d) Exercise right of stoppage in transit.

In ‘agreement to sell’ if there is a breach of contract by the buyer, the seller can sue only for damages and not for the price.
Breach of contract by the seller In ‘sale’ if there is a breach of contract by the seller, a buyer can:

(a) File a suit for damages against the seller.
(b) File a suit for delivery o! goods.

In ‘agreement to sell’ if there is a breach of contract by the seller, the buyer can sue only for damages.
Insolvency of buyer In a ‘sale’ if the buyer becomes insolvent seller must give the goods to the Official Assignee/ Receiver. The seller can claim only a rateable dividend for the price of goods. In ‘agreement to sell’ if the buyer becomes insolvent, the seller is not under obligation to give the goods to the Official Assignee/ Receiver.
Insolvency of seller In a ‘sale’ il a seller becomes insolvent Buyer can claim the goods from the Official Assignee/ Receher. In ‘agreement to sell’ if the seller becomes insolvent buyer can claim only a rateable dividend for the price paid from the Official Assignee / Receiver.

Question 11.
Distinguish between: Condition and warranty [June 2019 (3 Marks)]
Answer:
Following are the main points of difference between condition and warranty:

Points Condition Warranty
Meaning A condition is a stipulation essential to the main purpose of the contract. A warranty is a stipulation collateral to the main purpose of the contract.
Effect of breach Breach of the condition gives rise to a right to claim damages as well as to treat the contract as repudiated. Breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
Depth The condition goes directly to the root of the contract. Warranty does not go directly to the root of the contract.
Inter-change ability Breach of condition may be treated as a breach of a warranty in certain situations. Breach of warranty cannot be treated as a breach of condition.
Example X places an order to Y for some Lorries to be used for heavy traffic in a hilly area. The Lorries supplied were unfit. There is a breach of condition and Y can repudiate the contract. X sells the car to Y and also promises to replace or repair some parts if any defect occurs within 1 year. Stipulation to replace or repair some parts is a warranty.

Question 12.
When does a ‘condition’ become a ‘warranty?
Answer:
When condition to be treated as warranty [Section 13]: In the following cases, a breach of the condition can be treated as a breach of warranty.
1. Buyer’s discretion: The buyer instead of repudiating the contract can

  1. Waive the condition
  2. Elect to treat the condition as a warranty and can claim damages.

2. Acceptance of goods by the buyer: Where the contract of sale is not severable (divisible) and the buyer has accepted the goods the breach of the condition can only be treated as a breach of warranty.
Example: X ordered basmati rice 5 kg at ₹ 200/kg to Y. Mr. Y delivered kolam rice 5 kgs at X 120/kg. Now X would have canceled the contract but he was in urgent need of rice so he accepted kolam rice instead of basmati rice and he claimed damages from Mr. Y

However, where there is a term in the contract, that the buyer can reject the goods and repudiate the contract, the buyer can still exercise his right as the breach of condition.

Question 13.
State the implied condition ‘as to title’ and ‘as to sample’ in a contract of sale of specific goods.
Answer:
Condition as to title [Section 14]: In a contract of sale there is an implied condition on the part of the seller that:
(a) In the case of a sale, he has a right to sell the goods and
(b) In the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass.

In other words, in ‘contract of sale’, a seller should have a good and valid title, so that he can transfer good and valid title to the buyer. If it turns out that the seller’s title is defective, then the buyer can repudiate the contract.

Example: X brought a bike from Y. Y had no title to the bike. He had stolen the bike from Z. X had to hand over it true owner, Z. There is a breach of implied condition as to title from Y, and X can recover the price of a bike as well as can claim damages from Y.

Sale by sample [Section 17]: In the case of a contract for sale by sample there is an implied condition that:
(a) The bulk shall correspond with the sample.
(b) Buyer shall have a reasonable opportunity of comparing the bulk with the sample.
(c) The goods shall be free from any defect, rendering them un-merchantable, which would not be apparent on a reasonable examination of the sample.

Question 14.
Jolly bought a second-hand car from Yogesh for ₹ 85,000 and paid for it. After Jolly had used the car for six months he was deprived of it because Yogesh had no title to it. Can Jolly recover the price of the car from Yogesh? Advice Jolly.
Answer:
As per Section 14 of the Sale of Goods Act, 1930, in ‘contract of sale’, the seller should have a good and valid title, so that he can transfer good and valid title to the buyer. If it turns out that the seller’s title is defective, then the buyer can repudiate the contract.

In the given case, “implied condition as to title” is violated by Yogesh. Jolly can recover the price of the car as well as can claim damages from Yogesh.

Question 15.
A inspects a hot water bottle at a chemist’s shop and enquires whether it will stand boiling water. A is told that it will stand hot water but not boiling water and then he buys it. The moment A puts hot water into the bottle, it bursts causing him an injury. Has A any remedy against the chemist? Would there be any difference if he had asked for the hot water bottle under its patent name of “fuller’s flaw lets Bottle”?
Answer:
As per Section 16(2) of the Sale of Goods Act, 1930, where goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality. The term ‘merchantable quality’ is not defined in the Sale of Goods Act, 1930.

For the present case it means, the bottle must be properly sealed. In other words, if the goods are purchased for self-use, they should be reasonably fit for a purpose for which it is being used. In the instant case, on an examination of the hot water bottle, it exploded and injured the buyer. Applying the provision of section 16(2), Mr. Amit would succeed in claiming damage from the owner of the shop.

Question 16.
Write a short note on Implied Warranties
Answer:
The implied warranties in a contract of sale are as follows:
1. Warranty of quiet possession: In a contract of sale, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods.

2. Warranty from freedom from encumbrances [Section 14]: In a contract of sale, there is an implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time when the contract is made.

3. Warranty as to quality or fitness [Section 16]: An implied warranty or condition as to quality or fitness for particular goods may be annexed by the usage of trade and customs.

4. Warranty to the disclosure of dangerous nature of goods: If goods are of hazardous or dangerous nature, seller must disclose this fact to buyer otherwise he will be liable in damages.

Question 17.
What is the doctrine of caveat emptor? What are the exceptions to this doctrine?
Answer:
Caveat emptor means “let the buyer beware”. Generally, it is no part of the seller’s duty in a contract of sale of goods to give to the buyer an article suitable for a particular purpose, or of a particular quality. Also, the seller is under no obligation to point out the defects in the goods. It is the duty of the buyer to thoroughly examine the goods or to make known to the seller the purpose for which goods are required before he buys. If he makes the wrong choice, he cannot blame the seller.

Example: Where dogs were sold ‘subject to all faults’, and these dogs, being infected, caused typhoid to other healthy dogs of the buyer. The seller was not bound to disclose that the dogs were unhealthy.

Exceptions: The doctrine of caveat emptor will not apply in the following situations:
(This means the buyer can repudiate the contract and sue the seller for damages)

  • Where the buyer makes known to the seller the exact purpose for which goods are required or the buyer has indicated to the seller that he relies on seller’s skill or judgment and seller’s business is to sell goods of such description.
  • Where goods are bought by description and goods are not merchantable quality.
  • Where the seller makes a misrepresentation or fraud and the buyer relies on it.
  • Where the seller actively conceals a defect in the goods.
  • An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. In such cases, the principle of caveat emptor will not apply.

Question 18.
A goes to B shop and purchases silk-saree thinking that it is made of Banarsi silk. The shopkeeper knows that A thinking is wrong. He however does not correct A impression. Later on, when A discovers that the saree is not made of Banarsi silk he wants to avoid the contract. Would A succeed? Give reasons.
Answer:
Generally, it is no part of the seller’s duty in a contract of sale of goods to give to the buyer an article suitable for a particular purpose, or of a particular quality. Also, the seller is under no obligation to point out the defects in the goods. It is the duty of the buyer to thoroughly examine the goods or to make known to the seller the purpose for which goods are required before he buys. If he makes the wrong choice, he cannot blame the seller. In the given case, A himself has made the selection without depending upon the skills and judgment of the seller. Therefore, A cannot avoid the contract.

Question 19.
Distinguish between: Conditions and Warranties [June 2019 (3 Marks)}
Answer:
Following are the main points of difference between condition and warranty:

Points Condition Warranty
Meaning A condition is a stipulation essential to the main purpose of the contract. A warranty is a stipulation collateral to the main purpose of the contract.
Effect of breach Breach of the condition gives rise to a right to claim damages as well as to treat the contract as repudiated. Breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
Depth The condition goes directly to the root of the contract. Warranty does not go directly to the root of the contract.
Inter-change ability Breach of condition may be treated as a breach of the warranty in certain situations. Breach of warranty cannot be treated as a breach of condition.
Example X places an order to Y for some Lorries to be used for heavy traffic in a hilly area. The Lorries supplied were unfit. There is a breach of condition and Y can repudiate the contract. X sells the car to Y and also promises to replace or repair some part if any defect occurs within 1 year. Stipulation to replace or repair some parts is a warranty.

Question 20.
When does the property in goods pass from sellers to buyers in a contract for the sale of ascertained and unascertained goods?
Answer:
One of the essentials of the contract of sale is that property in goods (Le. ownership) is transferred from seller to buyer.

Following are the provision relating to the transfer of property:
1. Goods must be ascertained [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 sanctioned or ascertained.

2. Property passes when intended to pass [Section 19]: 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.

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.

Example: X offered to sell a car to Y for ₹ 50,000 after doing some repair work, which was accepted Y. While the car being repaired, it was destroyed without the fault of any party. It is clear from the contract that parties had the intention to pass the property in goods after repair and the car had destroyed before repair, hence no property in goods was transferred to Y and X has to bear the loss.

If parties have not decided as to when property in goods is to pass, then the following rules contained in sections 20 to 24 have to be followed.

3. Specific goods in a deliverable state [Section 20]: 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, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed.
Example: X sales a machine to Y which was ready for delivery. Y tells X that he will take delivery the next day. At night, the machine was destroyed by fire without the fault of any party. As the machine was in a deliverable state, property in goods had passed to Y and he has to bear the loss.

4. Specific goods to be put into a deliverable state [Section 21]: 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.

Example: There was a contract for the sale of a heavy machine that was embedded in a concrete floor. A part of the machine was destroyed while being removed. The buyer can refuse to buy the machine as it was not in a deliverable state.

5. Specific goods in a deliverable state, when the seller has to do something in order to ascertain price [Section 22]: 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.

6. Sale of unascertained goods and appropriation [Section 23]: Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.

Question 21.
A certain quantity of oil was bought. The oil was to be filled into barrels by the seller and then taken away by the buyer. Some barrels were filed in the presence of the buyer but before the remainders could be filled a fire broke out the entire quantity of oil was destroyed. State the liabilities of buyer and seller
Answer:
As per Section 21 of the Sale of Goods Act, 1930, 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.

In the given case, in respect of barrels that have been filled up, the buyer will have to bear the loss as they were in a deliverable state and the buyer had notice thereof.

In respect of barrels that have not been filled up, the seller has to bear the loss as they were not in a deliverable state.

Question 22.
Amar delivers some cotton bales to Bharat on a ‘sale or return basis. Bharat then delivers the same goods to Chandan and Chandan further delivers it to Dhruv on the same terms and conditions on which Amar delivers to Bharat. Before Dhruv could give his acceptance, goods are suddenly destroyed by fire. Who is to bear the loss under these circumstances? Give reasons in support of your answer.
Answer:
As per Section 24 of the Sale of Goods Act, 1930, when goods are delivered to the buyer on sale or return terms, the property passes to the buyer, if. the buyer does any act adopting the transaction.

Property in goods gets transferred from A to B, when B delivers watch on sale or return basis to C, from B to C, when C delivers watch on sale or return basis to D and from C to D, when D delivers watch on sale or return basis to E. Ownership is with D and hence he will bear the loss.

Question 23.
Ankur agreed to sell a horse to Eswar on the condition that Eswar will j keep the horse for 10 days on a trial basis and have the option to return the horse within the stipulated period if he does not find the horse suitable. However, the horse died on the third day without any fault of either seller or buyer. State the legal position.
Answer:
As per Section 24 of the Sale of Goods Act, 1930, when goods are delivered to the buyer on sale or return terms, the property passes to the buyer:
(a) When buyer signifies his approval or acceptance to the seller; or
(b) Buyer does any act adopting the transaction; or
(c) If the buyer does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, beyond a specified time and if not time has been specified, beyond a reasonable time.

In case of ‘sale or return basis, if goods get lost before property passes to the buyer without the fault of either party, the loss has to be borne by the seller.

In the given case horse died on the 3rd day whereas the buyer has the time of 10 days to signify his assent and he has not yet given his approval adopting the transaction. Thus, property in the horse has not been passed to the buyer and hence seller will bear the loss.

Question 24.
Risk prima facie passes with ownership. Discuss.
Answer:
Risk Prima facie passes with property [Section 26]: Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not.

If delivery has been delayed through the fault of either buyer or seller, the I goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault.

Question 25.
“No one can give a better title to the goods than what he himself has”. Comment on this statement and also discuss the exception to this rule as per the Sale of Goods Act, 1930.
Answer:
Nemo dati quod non-Habet means, “No one can give a better title to the goods than what he himself has”. Only a true owner can transfer to another person, valid title over the goods. A seller who does not have the ownership cannot confer the same upon the buyer.

Transfer by non-owner: Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods.

Exceptions:
1. Estoppel [Section 27]: Where the real owner by his conduct leads to believe the buyer that seller has authority to sell, the buyer gets a good title.

Example: In presence of Z, X sells goods to Y by telling that goods belong to him (X). Z does not object to X’s statement, Y gets a good title and Z will be estopped from denying the want of authority of X.

2. Sale by a mercantile agent [Section 27]: If goods are sold through a mercantile agent buyer gets a good title if the following conditions are fulfilled:
(a) Such a mercantile agent is in possession of the goods or of a document of title to the goods, with the consent of the owner.
(b) Such a mercantile is acting in the ordinary course of business of a mercantile agent.
(c) Buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.

Example: X gives his car to A, a mercantile agent for sale not below ₹ 1,00,000. A sells the car for ₹ 75,000 to Y. Y bought in good faith and without notice of instruction given by X to A. Y gets a good title.

3. Sale by joint owner [Section 28]: If one of several joint owners of goods has the sole possession of goods with the permission of other co-owners, the property in the goods is transferred to the person who buys in good faith and has not to notice that the seller has no authority to sell.

4. Sale by the person in possession under voidable contract [Section 29]:
When the seller of goods has obtained possession under a contract voidable, but the contract has not 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. Example: X purchases jewelry from Y, by making fraud. But before Y terminate the contract,’ X sells the jewelry to Z who buys it in good faith and without notice of X’s defective title. Z gets a good title.

5. Sale by a person in possession after the sale [Section 30]:
(a) Seller in possession of goods after-sale can pass on good and valid title if subsequent transferee receives the goods in good faith and for consideration.
(b) Similarly, the buyer who is in possession of goods to whom the property in goods has not been passed sell goods, the subsequent transferee gets good title if he receives the goods in good faith and for consideration.

Example 1: B buys a mobile from S which he agrees to deliver to B the next day. S sells the same mobile to T who pays a higher price than B. T buys in good faith and without notice of the previous sale. T gets a good title.
Example 2: B bought a TV on hire purchase from S. B sold it to T, who purchased it in good faith. T gets a good title.

6. Sale by unpaid seller [Section 54]: Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title as against the original buyer.

7. Sale by a finder of goods: Finder of goods can sell the goods, if:

  • The owner cannot be found with reasonable diligence.
  • The owner, if found, does not pay the lawful charges of the finder.
  • Goods are in danger of perishing.
  • The lawful charges of the finder, amount to 2/3rd of the value of goods.

8. Sale by a pawnee: If the pawnor makes default in payment of the debt, the pawnee may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.

Question 26.
Aman, Raman, and Chaman were joint-owners of a truck, and possession of the said truck was with Raman. Sudhir purchased the truck from Raman without knowing that Aman and Chaman were also co-owners of the truck. Decide in the light of the provisions of the Sale of Goods Act, 1930 whether the sale between Raman and Sudhir is valid.
Answer:
No one can give a better title to the goods than what he himself has. However, as per Section 28 of the Sale of Goods Act, 1930, if one of several joint owners of goods has the sole possession of goods with the permission of other co-owners, the property in the goods is transferred to the person who buys in good faith and has not to notice that the seller has no authority to sell. In the given case, one of the joint owners Raman had possession of the Truck and Sudhir had purchased the truck without knowing that Aman and Chaman were also co-owners of the truck. Hence, applying the provision of section 28 property in Truck has been passed to the Sudhir.

Question 27.
Write short notes on Kinds of delivery of goods
Answer:
Delivery [Section 2(2)]: Delivery means voluntary transfer of possession from one person to another.

Delivery [Section 33]: Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf.
Delivery of goods may be actual, symbolic, or constructive.

  1. Actual delivery: When goods are physically handed over to the buyer or his authorized agent, it is known as actual delivery.
  2. Symbolic delivery: Where goods are bulky or heavy and it is not possible to hand over physical goods to the buyer in such case delivery is made by handing over some symbol, which is known as symbolic delivery.

Examples:
(a) Delivering the key of the warehouse where goods are stored.
(b) Delivering bill of lading which will enable the holder to receive the goods on the arrival of the ship.
(3) Constructive delivery: When the person in possession of goods ac-knowledges that he holds the goods on behalf of and at the disposal of the buyer, it is known as constructive delivery.

Examples:
(a) Where the seller after having sold the goods, hold them on behalf of the buyer there is constructive delivery.
(b) Where the seller sells the goods lying in the warehouse and the warehouse keeper holds the goods on behalf of the buyer by making necessary entries in his books there is constructive delivery.

Question 28.
Amil sells to Sachin a specific horse which is to be delivered to Sachin the next week. Sachin is to pay the price on delivery. In the next week, Sachin was ready to pay price for the horse. But Amil was not in a position to deliver the horse to Sachin. Amit asks Sachin to take the delivery of the horse after another week. The horse dies before it is delivered to and paid for. Who shall bear the loss? Explain.
Answer:
As per Section 32 of the Sale of Goods Act, 1930, unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions. Thus, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer shall be ready and willing to pay the price in exchange for possession of the goods.

In the given case Amit’s main duty is to deliver the horse to the buyer Sachin. He has failed to perform his part under the contract of sale. Hence, Amit will bear the loss.

Question 29.
Who is an unpaid seller?
Answer:
“Unpaid seller” defined [Section 45]: The seller of goods is deemed to be an unpaid seller:
(a) When the whole of the price has not been paid or tendered, or
(b) When a bill of exchange or other negotiable instrument has been received as conditional payment and the condition has not been fulfilled by reason of the dishonor of the instrument or otherwise.

“Seller” includes any person who is in the position of a seller, as an agent of the seller to whom the bill of lading has been endorsed or a consignor or agent who has paid himself, or is directly responsible for, the price.

Small Dues: Even if a small balance is pending, the seller is still regarded as an unpaid seller.

Question 30.
State the rights of an unpaid seller under the Sale uf Goods Act, 1930.
Answer:
Rights of an unpaid seller against the goods [Section 46(1)]:
1. When the property in goods has passed to the buyer:

  • Right of lien on the goods in his possession
  • Right of stoppage of goods in transit if the buyer becomes insolvent
  • Right of resale

2. When property In goods has not passed to the buyer:

  • Right of withholding delivery (+) above three remedies. Rights of an unpaid seller against the buyer [Section 46(2)]:
  • Right to file a suit for the price
  • Right to file a suit for damages, and
  • Right to file a suit for interest

Question 31.
Write a short note on the Unpaid seller’s right of stoppage in transit
Answer:
When an unpaid seller stops the goods during the continuance of transit and regain the possession of goods, it is said that the seller is exercising the right of stoppage in transit.

As soon as the right of the lien ends right of stoppage in transit starts.

Right of stoppage in transit [Section 50]: 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. Seller 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.

How stoppage in transit is effected [Section 52]: The unpaid seller may exercise his right of stoppage in transit either by taking actual possession of the goods or by giving notice of his claim to the carrier or other bailee in whose possession the goods are.

Such notice may be given either to the person in actual possession of the goods or to his principal.

When notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of the goods, he shall re-deliver the goods to the seller. The expenses of such re-delivery shall be borne by the seller.

Question 32.
Can an unpaid seller resell the goods and if so when?
Answer:
Unpaid seller’s right of resale [Section 54]: The unpaid seller can re-sell the goods already sold, if –

  • Goods are of a perishable nature.
  • Where the unpaid seller gives notice of resale to the buyer.

If resale price is:
Less than contracted price: Seller can recover the balance from the buyer. More than contracted price: Seller is not bound to give extra to the buyer.
Example: X sells some goods to Y for 5,000. X is in possession of goods.

He gives notice to Y to pay for the goods and take the delivery. Y does not pay for the goods. If X resale the goods at market price which is 4,500 he can still recover 500 from buyer arid if X resale at market price which is 6,000, he is not bound to repay excess amount Le. 1,000 to the buyer.

However, if X does not give the notice of resale and sells the goods at 4,500, he cannot recover at 500 from the buyer. If he resale the goods at 6,000, he will have to repay the excess amount Le. 1,000 to the buyer.

Conditions to exercise right of resale: Right of resale can be exercised by the unpaid seller only when he is in possession of the goods either by:

  • Exercise of his lien on the goods, or
  • Has regained possession from the carrier by issuing a notice of stoppage in transit upon buyer’s insolvency.

Good title to the subsequent buyer: The subsequent buyer acquires good title thereof as against the original buyer, even if no notice of re-sale has been given by the seller to the original buyer.

Question 33.
Write a short note on Auction Sales
Answer:
The auction sale is a public sale where bids are invited and goods are sold to the highest bidder.

Presenting goods for auction sale is an ‘invitation to make an offer. When a bidder makes a bid, it is an ‘offer’ and ‘sale’ is complete when the auctioneer accepts the bid.

Auctioneer can accept bid any of the following manners:

  • By saying 1, 2 & 3.
  • B saying going, going, gone.
  • By fall of the hammer.

Provisions relating to auction sale [Section 64]:
1. SaIe in lots: In the case of sale by auction, where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale.

2. CompletIon of sale: The sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner and, until such announcement is made, any bidder may withdraw his bid.

Example: X makes a bid at an auction sale but withdraws it before the fall of the hammer. One of the conditions of sale was, Ñbid once made shall not be withdrawn which X knew. The offer/bid withdrawn by X is valid and the sale is not completed.

3. RIght of the seller to bid: A right to bid may be reserved by the seller and, where such right is expressly reserved, the seller or any one person on his behalf may bid at the auction.

Where the sale is not notified to be subject to a right to bid on behalf of the seller, such sale may be treat as fraudulent by the buyer.

4. Reserved price: The sale may be notified to be subject to a reserved or upset price.

5. Pretended to bid: When a seller appoints a person to make a bid on his behalf to get a higher price, it is known as pretended bidding. A person appointed by the seller is known as ‘puffers’.

If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.

6. Knock out agreement/cartel: It is a secret agreement between bidders by which they agree not to compete with each other and only one of them will bid and they will distribute privately anything obtained at the auction sale.

Economic, Business and Commercial Laws Questions and Answers

Leave a Comment

Your email address will not be published.