Description
law of sale of goods in detail. It explains different kinds of goods, essentials of a contract of sale, how contract of sale is made and also differentiates between sale and agreement to sell. It also highlights the shortcomings of law of sale of goods.
LAW OF SALE OF GOODS
• Neha Chaudhary (459): Meaning of goods and sale • Swapnil Gugnani (418), Rohit Arora (410): Essentials of a contract of sale • Abhay Mishra (433): Sale Vs Agreement to sell • Rasagya Bagga (411) : Conditions & Warranties (Quality of Goods) • Amit Khandelwal (427): • Caveat Emptor
GOODS
• Sec.2(7). ‘Goods means 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 contract of sale.’
NOTE: In practice, the term goods is mostly confined to ‘chattels’ which are capable of manual delivery, such as furniture and merchandise. It excludes information, services, money and real property like land, buildings, structures etc.
KIND OF GOODS
Existing goods- Sec.6(1) these are the goods which are in existence and are physically present in the sellers possession. They are further classified as: • Specific goods- 2(14) – these are the goods identified and agreed upon at the time the contract is made.
Example: A buys a second hand Volkswagen Polo registration no. B207 from S
• Ascertained goods- these are identified after the formation of the contract.
Example: A buys an ice cream Sunday and chooses the flavours later
• Unascertained goods- these are the goods which are not specifically identified or agreed upon at the time of the contract of sale.
Example: A buys a new Volkswagen Polo from dealer S.
KIND OF GOODS
• Future goods -which do not exist with the seller at the time of sale. The contract thus is an agreement to sell.
Example: S decides to sell 100 kgs of wheat to B, upon the maturity of the crop.
• Contingent goods- a type of future goods, the acquisition of which depends upon a contingency which may or may not happen.
Example: S decides to acquire and sell an antique table to B, which is currently owned by X
SALE
Sale is a special form of a contract. Eg. • Neha gives Swapnil her mobile phone in exchange for his watch.
• Neha contracts to give Swapnil her mobile phone for a payment of Rs 2000 and the phone will have to be returned after a year. • Neha contracts to give Swapnil her mobile phone for a payment of Rs 5000.
SALE
Sale is a special form of a contract. Eg. • Neha gives Swapnil her mobile phone in exchange for his watch. BARTER • Neha contracts to give Swapnil her mobile phone for a payment of Rs 2000 and the phone will have to be returned after a year. HIRE • Neha contracts to give Swapnil her mobile phone for a payment of Rs 5000. SALE
SALE
• The agreement or contract by which a transfer of property or title in exchange for a sum of money from the buyer to the seller. A buyer is a person who buys or agrees to buy goods A seller is a person who sells or agrees to sell goods • In a sale, the consideration for the buyer is the transfer of ownership and that for the seller is a price in cash. • The sale may be absolute or conditional: ? Absolute Sale: Sale whereby the property passes to the buyer upon completion of an agreement between the parties. ? Conditional Sale: A sale of property or goods which will be completed if certain conditions are met (as agreed) by one or both parties to the transaction. Eg: Neha agrees to buy Swapnil's Honda city for Rs 1,00,000 cash if he can get the car running by September 1.
Essentials of a Contract of sale
Definition
(Section 4) 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 price.
How Contract of Sale is made
• A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. • How it comes into force ??
• Credit sale is also a ‘sale’
The Essentials
1. There must be at least two parties 2. Transfer or Agreement to transfer the ownership of goods. 3. The subject matter of the contract must necessarily be 'goods'. 4. The consideration is Price. 5. A Contract of sale may be absolute or conditional 6. All other essentials of a valid contract must be present
At least two parties
Two parties are required for contract. “Buyer” means a person who buys or agrees to buy goods. “Seller” means a person who sells or agrees to sell goods. A part owner can sale his part to another partowner. However, if joint owners distribute property among themselves as per mutual agreement, it is not ‘sale’ as there are no two parties.
Transfer or Agreement to transfer the ownership of goods.
• The general rule :"Nemo dat quod non habet“
• Exceptions:
– Sale by Mercantile Agent
– – – – Sale by a Joint-owner Sale by a Person in Possession under a Voidable Contract Sale by the Seller in Possession of Goods after Sale Sale by an unpaid seller
Contd…
• Contract of Sale includes agreement to sale • Transfer of Property • Possession and property
The subject matter of the contract must necessarily be 'goods'.
• Sale of immovable property is not covered by this Act. • Type Of Goods
– Existing Goods Existing goods may be either:
• (a) Specific and Ascertained - goods identified and agreed upon at the time a contract of sale is made; or • (b) Generic and Unascertained - goods indicated by description and not specifically identified.
– Future Goods – Contingent Goods
Consideration Vs Price
• Consideration in a contract of sale, has to be the legal tender • Where goods are exchanged for goods, it would amounts to Barter, not sale. • Where there in no consideration, it would be a gift and not a sale.
Consideration Vs Price (cont)
• Where goods are sold for a price, which is to be paid partly in cash and partly in goods, that is a sale.
Judgements
• Sheldon Vs Cox, 1824, 3B and C, 420 “ There can be no sale without a price; but it is not the payment of the price, but the agreement of parties, which completes a sale carried through without writing. ”
Judgements
Aldridge Vs Johnson, 1857, 7E and B, 385 A agreed to exchange with B 100 quarters of Barley at 2 pounds per quarter for 52 bullocks valued at at 6 pound bullock and pay the difference in cash. Held contract was a contract of Sale
Absolute or Conditional
A contract of sale may be absolute or based on certain • Conditions • Guarantees • Warrantees
Essentials of a contract
1. Intention to create legal
relationship.
5. Free Consent
6. Capacity of parties to
2.Lawful object
3.Agreement not expressly
contract
7. Certainty of meaning.
declared void
4.Proper offer and it s
8. Possibility of performance.
9. Lawful consideration
acceptance
10.Legal formalities
What is Sale and Agreement to sell?
• Where under a contract of sale the property is transferred from seller to the buyer ,the contract is called a ‘sale’.
• Where the transfer of property is to take place at a future date or subject to some condition, and not at the time of the contract, the contract of sale is termed as an agreement to sell.
Sale Vs Agreement to sell
1) Nature of Contract
• Sale is an ‘executed contract’. • Agreement to sell is an ‘executory contract’.
Sale Vs Agreement to sell
2) Creation of right • Sale creates a ‘jus-in-rem’. • Agreement to sell creates a ‘jus-inpersonam’.
Sale Vs Agreement to sell
3) Passing of property • In a sale the property in the goods passes to the buyer with the risk. • In agreement the property and risk does not pass to the buyer immediately.
Sale Vs Agreement to sell
4) Remedies for breach of contract • In a sale, the seller is entitled to sue for the price of goods and also has a right of lien, stoppage in transit and re-sale. • In an agreement to sell ,the seller can only sue for damages for non-performance of contract.
Sale Vs Agreement to sell
5) Risk in case of loss of goods • In a sale, the buyer bears the loss. • In an agreement to sell ,the seller bears the loss.
Sale Vs Agreement to sell
6) Insolvency of buyer • In a sale, the seller must deliver goods to the Official Assignee or Receiver and can claim rateable dividends for the price of goods.
• In an agreement to sell ,the seller may refuse to deliver the goods unless paid for.
Sale Vs Agreement to sell
7) Insolvency of seller • In a sale, the buyer is entitled to receive goods from the Official Assignee or Receiver . • In an agreement to sell ,the buyer cannot compel the Receiver to deliver the goods and can only claim a rateable dividend.
When does an agreement to sell become a sale?
An agreement to sell becomes a sale when :• the time elapses. or • the conditions subject to which the property in the goods is to be transferred are fulfilled .
Condition and Warranty
A stipulation in a contract of sale with reference to goods which are the subject may be a condition or a warranty. • A condition is essential to the main purpose of the contract • A warranty collateral to the main purpose of the contract • Whether a stipulation in a contract of sale is condition or a warranty depends in each case on the construction of the contract.
Conditions and Warranty
1) Breach of condition Breach of condition gives right to the aggrieved party right to treat the contract as repudiated . 2) Breach of warranty Breach of warranty gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
When Condition is treated as a Warranty
• Buyer may waive the condition or elect to treat the breach of condition as a breach of warranty and not as a ground for treating the contract as repudiated
When Condition is treated as a Warranty
• Where a contract of sale is not seller able and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect
When Condition is treated as a Warranty
• Fulfillment of condition or warranty excused by operation of law by reason of impossibility
Implied Conditions
• • • • • • • Title Sale by description of goods Sale by sample Quality or fitness for particular purpose Merchantable quality Wholesome Implied by custom
Sale by General name
• A product sold by its general name should be fit for the basic purpose for which it is used • Product should be of merchantable quality
Sale by description
• If the buyer has not seen or examined the goods: Goods sold must correspond to its description • If the buyer has seen and examined the goods: The description would be modified to the extent of apparent deviations.
Sale by Sample
• The bulk should correspond with the sample • The should be of merchantable quality
Implied warranty
• Quiet possession • Freedom from encumbrances • Quality/fitness of goods for particular purpose • Annexed by custom/ usage of trade
Implied condition or warranty
No Implied condition or warranty as to quality or fitness of goods for an particular purpose except as under• When buyer discloses to seller the purpose for which goods are required and relies on the sellers skill or judgment • Seller’s business is to supply such goods in course of his business
Case Varley v. Whipp
• Second hand reaping machine • Newly bought in the previous year • Used to cut fifty or sixty acres Whipp’s stand •Very old •Has been mended •Of no use •Varley offered to sell Whipp a second hand reaping machine •He bought it from the owner and put it on railway on June 28, 1899 to send it to Whipp •On July 2, Whipp returned the machine and moved to curt to recover damages Courts Ruling The term Sale of goods by description apply to all cases where the purchaser has never seen the goods, but relying on decision alone.
Varley’s stand • He had not seen the good • At the time of sale the reaper did not belong to him
Shortcomings of Sales of goods Act
If there is no privity of contract between the customer and the manufacturer, then the manufacturer can end up misleading the customer Consumer Protection Act , 1986, Monopolies and Restrictive Trade Practices Act, 1969
The concept of merchantable quality was not designed to resolve the question of duration
Merchants attempt to resolve this problem by specifying explicit warranty period
Caveat Emptor
What is the doctrine of ‘Caveat Emptor’?
• Caveat Emptor means “let the buyer beware”. • Buyer purchases the goods at his own risk by relying on his own skill and judgment. • There is no implied warranty and condition as to the fitness for purpose of goods bought. • The doctrine is laid down in Article 16.
Exceptions
Some Elaboration about Exceptions
Exception 1:
• When buyer makes known to seller for which particular purpose the goods are required. • She/he relies on seller’s skills. • And goods are in course of sellers business to supply.
• Then, it is the duty of seller to supply goods as are reasonably fit for that purpose. [Section16(1)]
Exception 2:
• When goods are purchased under its patent name or brand name. • There is no implied condition that the goods will be fit for any particular purpose.
Exception 3
• When goods are sold by description • There is an implied condition that the goods shall correspond with that description.
Exception 4:
• Where goods are brought by sample. • The rule of Caveat Emptor does not apply if the bulk does not correspond with sample.
Exception 5
• Where goods are brought by sample and description. • The rule of Caveat Emptor is again not applicable in case the goods do not correspond with the sample and description.
Exception 6:
• Condition – When goods are bought by a seller who deals in goods of that description. • With an implied condition that goods shall be of merchantable quality, then the rule is not applicable. • But if the buyer has examined the goods, the rule is applicable provided the defects were revealed by ordinary examination.[Section 16(2)]
Exception 7:
• When the goods are sold by seller under misrepresentation or fraud and buyer relies on it • Alternatively, seller conceals some defects so that it is not discovered on reasonable examination. • The rule is not applicable! • Buyer has the right to avoid contract and claim damages.
doc_870461049.ppt
law of sale of goods in detail. It explains different kinds of goods, essentials of a contract of sale, how contract of sale is made and also differentiates between sale and agreement to sell. It also highlights the shortcomings of law of sale of goods.
LAW OF SALE OF GOODS
• Neha Chaudhary (459): Meaning of goods and sale • Swapnil Gugnani (418), Rohit Arora (410): Essentials of a contract of sale • Abhay Mishra (433): Sale Vs Agreement to sell • Rasagya Bagga (411) : Conditions & Warranties (Quality of Goods) • Amit Khandelwal (427): • Caveat Emptor
GOODS
• Sec.2(7). ‘Goods means 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 contract of sale.’
NOTE: In practice, the term goods is mostly confined to ‘chattels’ which are capable of manual delivery, such as furniture and merchandise. It excludes information, services, money and real property like land, buildings, structures etc.
KIND OF GOODS
Existing goods- Sec.6(1) these are the goods which are in existence and are physically present in the sellers possession. They are further classified as: • Specific goods- 2(14) – these are the goods identified and agreed upon at the time the contract is made.
Example: A buys a second hand Volkswagen Polo registration no. B207 from S
• Ascertained goods- these are identified after the formation of the contract.
Example: A buys an ice cream Sunday and chooses the flavours later
• Unascertained goods- these are the goods which are not specifically identified or agreed upon at the time of the contract of sale.
Example: A buys a new Volkswagen Polo from dealer S.
KIND OF GOODS
• Future goods -which do not exist with the seller at the time of sale. The contract thus is an agreement to sell.
Example: S decides to sell 100 kgs of wheat to B, upon the maturity of the crop.
• Contingent goods- a type of future goods, the acquisition of which depends upon a contingency which may or may not happen.
Example: S decides to acquire and sell an antique table to B, which is currently owned by X
SALE
Sale is a special form of a contract. Eg. • Neha gives Swapnil her mobile phone in exchange for his watch.
• Neha contracts to give Swapnil her mobile phone for a payment of Rs 2000 and the phone will have to be returned after a year. • Neha contracts to give Swapnil her mobile phone for a payment of Rs 5000.
SALE
Sale is a special form of a contract. Eg. • Neha gives Swapnil her mobile phone in exchange for his watch. BARTER • Neha contracts to give Swapnil her mobile phone for a payment of Rs 2000 and the phone will have to be returned after a year. HIRE • Neha contracts to give Swapnil her mobile phone for a payment of Rs 5000. SALE
SALE
• The agreement or contract by which a transfer of property or title in exchange for a sum of money from the buyer to the seller. A buyer is a person who buys or agrees to buy goods A seller is a person who sells or agrees to sell goods • In a sale, the consideration for the buyer is the transfer of ownership and that for the seller is a price in cash. • The sale may be absolute or conditional: ? Absolute Sale: Sale whereby the property passes to the buyer upon completion of an agreement between the parties. ? Conditional Sale: A sale of property or goods which will be completed if certain conditions are met (as agreed) by one or both parties to the transaction. Eg: Neha agrees to buy Swapnil's Honda city for Rs 1,00,000 cash if he can get the car running by September 1.
Essentials of a Contract of sale
Definition
(Section 4) 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 price.
How Contract of Sale is made
• A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. • How it comes into force ??
• Credit sale is also a ‘sale’
The Essentials
1. There must be at least two parties 2. Transfer or Agreement to transfer the ownership of goods. 3. The subject matter of the contract must necessarily be 'goods'. 4. The consideration is Price. 5. A Contract of sale may be absolute or conditional 6. All other essentials of a valid contract must be present
At least two parties
Two parties are required for contract. “Buyer” means a person who buys or agrees to buy goods. “Seller” means a person who sells or agrees to sell goods. A part owner can sale his part to another partowner. However, if joint owners distribute property among themselves as per mutual agreement, it is not ‘sale’ as there are no two parties.
Transfer or Agreement to transfer the ownership of goods.
• The general rule :"Nemo dat quod non habet“
• Exceptions:
– Sale by Mercantile Agent
– – – – Sale by a Joint-owner Sale by a Person in Possession under a Voidable Contract Sale by the Seller in Possession of Goods after Sale Sale by an unpaid seller
Contd…
• Contract of Sale includes agreement to sale • Transfer of Property • Possession and property
The subject matter of the contract must necessarily be 'goods'.
• Sale of immovable property is not covered by this Act. • Type Of Goods
– Existing Goods Existing goods may be either:
• (a) Specific and Ascertained - goods identified and agreed upon at the time a contract of sale is made; or • (b) Generic and Unascertained - goods indicated by description and not specifically identified.
– Future Goods – Contingent Goods
Consideration Vs Price
• Consideration in a contract of sale, has to be the legal tender • Where goods are exchanged for goods, it would amounts to Barter, not sale. • Where there in no consideration, it would be a gift and not a sale.
Consideration Vs Price (cont)
• Where goods are sold for a price, which is to be paid partly in cash and partly in goods, that is a sale.
Judgements
• Sheldon Vs Cox, 1824, 3B and C, 420 “ There can be no sale without a price; but it is not the payment of the price, but the agreement of parties, which completes a sale carried through without writing. ”
Judgements
Aldridge Vs Johnson, 1857, 7E and B, 385 A agreed to exchange with B 100 quarters of Barley at 2 pounds per quarter for 52 bullocks valued at at 6 pound bullock and pay the difference in cash. Held contract was a contract of Sale
Absolute or Conditional
A contract of sale may be absolute or based on certain • Conditions • Guarantees • Warrantees
Essentials of a contract
1. Intention to create legal
relationship.
5. Free Consent
6. Capacity of parties to
2.Lawful object
3.Agreement not expressly
contract
7. Certainty of meaning.
declared void
4.Proper offer and it s
8. Possibility of performance.
9. Lawful consideration
acceptance
10.Legal formalities
What is Sale and Agreement to sell?
• Where under a contract of sale the property is transferred from seller to the buyer ,the contract is called a ‘sale’.
• Where the transfer of property is to take place at a future date or subject to some condition, and not at the time of the contract, the contract of sale is termed as an agreement to sell.
Sale Vs Agreement to sell
1) Nature of Contract
• Sale is an ‘executed contract’. • Agreement to sell is an ‘executory contract’.
Sale Vs Agreement to sell
2) Creation of right • Sale creates a ‘jus-in-rem’. • Agreement to sell creates a ‘jus-inpersonam’.
Sale Vs Agreement to sell
3) Passing of property • In a sale the property in the goods passes to the buyer with the risk. • In agreement the property and risk does not pass to the buyer immediately.
Sale Vs Agreement to sell
4) Remedies for breach of contract • In a sale, the seller is entitled to sue for the price of goods and also has a right of lien, stoppage in transit and re-sale. • In an agreement to sell ,the seller can only sue for damages for non-performance of contract.
Sale Vs Agreement to sell
5) Risk in case of loss of goods • In a sale, the buyer bears the loss. • In an agreement to sell ,the seller bears the loss.
Sale Vs Agreement to sell
6) Insolvency of buyer • In a sale, the seller must deliver goods to the Official Assignee or Receiver and can claim rateable dividends for the price of goods.
• In an agreement to sell ,the seller may refuse to deliver the goods unless paid for.
Sale Vs Agreement to sell
7) Insolvency of seller • In a sale, the buyer is entitled to receive goods from the Official Assignee or Receiver . • In an agreement to sell ,the buyer cannot compel the Receiver to deliver the goods and can only claim a rateable dividend.
When does an agreement to sell become a sale?
An agreement to sell becomes a sale when :• the time elapses. or • the conditions subject to which the property in the goods is to be transferred are fulfilled .
Condition and Warranty
A stipulation in a contract of sale with reference to goods which are the subject may be a condition or a warranty. • A condition is essential to the main purpose of the contract • A warranty collateral to the main purpose of the contract • Whether a stipulation in a contract of sale is condition or a warranty depends in each case on the construction of the contract.
Conditions and Warranty
1) Breach of condition Breach of condition gives right to the aggrieved party right to treat the contract as repudiated . 2) Breach of warranty Breach of warranty gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
When Condition is treated as a Warranty
• Buyer may waive the condition or elect to treat the breach of condition as a breach of warranty and not as a ground for treating the contract as repudiated
When Condition is treated as a Warranty
• Where a contract of sale is not seller able and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect
When Condition is treated as a Warranty
• Fulfillment of condition or warranty excused by operation of law by reason of impossibility
Implied Conditions
• • • • • • • Title Sale by description of goods Sale by sample Quality or fitness for particular purpose Merchantable quality Wholesome Implied by custom
Sale by General name
• A product sold by its general name should be fit for the basic purpose for which it is used • Product should be of merchantable quality
Sale by description
• If the buyer has not seen or examined the goods: Goods sold must correspond to its description • If the buyer has seen and examined the goods: The description would be modified to the extent of apparent deviations.
Sale by Sample
• The bulk should correspond with the sample • The should be of merchantable quality
Implied warranty
• Quiet possession • Freedom from encumbrances • Quality/fitness of goods for particular purpose • Annexed by custom/ usage of trade
Implied condition or warranty
No Implied condition or warranty as to quality or fitness of goods for an particular purpose except as under• When buyer discloses to seller the purpose for which goods are required and relies on the sellers skill or judgment • Seller’s business is to supply such goods in course of his business
Case Varley v. Whipp
• Second hand reaping machine • Newly bought in the previous year • Used to cut fifty or sixty acres Whipp’s stand •Very old •Has been mended •Of no use •Varley offered to sell Whipp a second hand reaping machine •He bought it from the owner and put it on railway on June 28, 1899 to send it to Whipp •On July 2, Whipp returned the machine and moved to curt to recover damages Courts Ruling The term Sale of goods by description apply to all cases where the purchaser has never seen the goods, but relying on decision alone.
Varley’s stand • He had not seen the good • At the time of sale the reaper did not belong to him
Shortcomings of Sales of goods Act
If there is no privity of contract between the customer and the manufacturer, then the manufacturer can end up misleading the customer Consumer Protection Act , 1986, Monopolies and Restrictive Trade Practices Act, 1969
The concept of merchantable quality was not designed to resolve the question of duration
Merchants attempt to resolve this problem by specifying explicit warranty period
Caveat Emptor
What is the doctrine of ‘Caveat Emptor’?
• Caveat Emptor means “let the buyer beware”. • Buyer purchases the goods at his own risk by relying on his own skill and judgment. • There is no implied warranty and condition as to the fitness for purpose of goods bought. • The doctrine is laid down in Article 16.
Exceptions
Some Elaboration about Exceptions
Exception 1:
• When buyer makes known to seller for which particular purpose the goods are required. • She/he relies on seller’s skills. • And goods are in course of sellers business to supply.
• Then, it is the duty of seller to supply goods as are reasonably fit for that purpose. [Section16(1)]
Exception 2:
• When goods are purchased under its patent name or brand name. • There is no implied condition that the goods will be fit for any particular purpose.
Exception 3
• When goods are sold by description • There is an implied condition that the goods shall correspond with that description.
Exception 4:
• Where goods are brought by sample. • The rule of Caveat Emptor does not apply if the bulk does not correspond with sample.
Exception 5
• Where goods are brought by sample and description. • The rule of Caveat Emptor is again not applicable in case the goods do not correspond with the sample and description.
Exception 6:
• Condition – When goods are bought by a seller who deals in goods of that description. • With an implied condition that goods shall be of merchantable quality, then the rule is not applicable. • But if the buyer has examined the goods, the rule is applicable provided the defects were revealed by ordinary examination.[Section 16(2)]
Exception 7:
• When the goods are sold by seller under misrepresentation or fraud and buyer relies on it • Alternatively, seller conceals some defects so that it is not discovered on reasonable examination. • The rule is not applicable! • Buyer has the right to avoid contract and claim damages.
doc_870461049.ppt