Q.1. A-- Enumerate the essentials of a contract of sale. How does a contract of sale differ from an agreement to sell? Refer to decided cases.

(b) Distinguish between the following:

(i) Sale and Hire purchase.

(ii) Sale and Barter.

Ans. (a) Essentials of Contract of Sale of Goods; Section 4(1) of Sales of Goods Act says :

"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."

1. The first essential of a contract of sale is that either there is the actual transfer of property i.e., ownership or there is an agreement, to transfer property on some future date on the fulfilment of some condition, e.g., payment of price on delivery of goods. etc. Where property, i.e., ownership passes immediately from the seller to the buyer, it is a sale but where the property is to pass on some future date, it is an agreement to sell. But both sale and an "agreement to sale" are included in a contract of sale. This essential feature distinguishes sale from bailment, in which there is neither actual transfer nor agreement to transfer property in goods but where goods are delivered to transferee property in goods and for some specific purpose on the condition that they shall be returned after the purpose is over.

2. The second essential of a contract of sale is that the transfer of property is from the seller to the buyer. In other words, in every contract of sale, there must be at least two parties the seller and the buyer, and no one can be a seller to himself

3. The third essential is that there is a transfer or agreement to transfer property i.e., ownership and not merely delivery of possession.

4. The fourth essential is that goods are to be transferred or agreed to be transferred for a price. In other words, in a contract of sale, the consideration is always money. Where there is no consideration, the transaction amounts to a gift and not a contract of sale. Similarly, where the consideration is the delivery of some other goods, the transaction is not a contract of sale but is a contract of exchange or barter.

A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such an offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed.

A contract of sale may be made in writing or by word of mouth, or partly in writing, and partly by word of mouth or may be implied from the conduct of the parties. But this is subject to the provisions of any law for the time being in force (Section 5)

The distinction between 'sale' and an 'agreement to sell'

(1) In a sale, the property is the goods are transferred immediately from the seller to the buyer, but in an agreement to sell, the transfer of the property in goods is to take place at a future time or subject to some condition thereafter to be fulfilled.

(2) An agreement to sell, is an executory contract of sale, as it is called in English law, is a contract pure and simple and no property passes. Therefore, the goods remain liable to attachment and sale in execution of any decree passed against the seller. In the case of a sale, property in the goods passes immediately from the seller to the buyer and therefore goods cannot be attached and sold in execution of any decree passed against the seller when once they have been sold by him.

(3) A sale creates a right in rem while an agreement to sell creates only a right in personam. In the case of the sale, property in goods passes from the seller to the buyer and the buyer becomes the owner of the goods and this right of ownership of the buyer is recognized by the whole world. In case of an agreement to sell, the buyer and the seller get a remedy against the person and general estate of each other in case of breach of an agreement. The agreement creates a right with which only the contracting parties are concerned and not the world.

(4) In a sale, as property in goods passes immediately to the buyer, so if the goods are stolen or destroyed, the loss falls upon the buyer unless otherwise agreed upon between the parties, But in an agreement to sell, the loss falls upon the seller unless otherwise agreed upon. (Section 26).

(5) In a sale the seller may sue for the price in case of default by the buyer, but in an agreement to sell the seller can sue only for damages. According to Section 55 where under a contract of sale the property in the goods has passed to the buyer, i.e., transaction amounts to sale and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract the seller may sue him for the price of the goods. But, according to Section 56, in the case of an agreement to sell, if the buyer wrongfully neglects or refuses to accept and pay for the goods the seller may sue him for damages for non-acceptance.

Ans. (b)(i)- Contract of sale distinguished from Hire-purchase Agreement - In a contract of sale the seller transfers or agrees to transfer the property in the goods to the buyer for a price. In hire-purchase, there is no such agreement. A hire-purchase agreement is a contract of hire and it may eventually ripen into a sale.

According to Section 2(c), Hire-Purchase Act, 1972, "hire-purchase agreement" means an agreement under which goods are let on hire and under which the hirer has the option to purchase them in accordance with the terms of the agreement and includes an agreement under which

(i) the possession of the goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical instalments, and

(ii) the property in the goods is to pass to such person on the payment of the last of such instalments, and

(iii) such a person has a right to terminate the agreement at any time before the property so passes.

Hire-Purchase Agreement

A hire-purchase agreement is a popular modern transaction in which the owner of goods delivers the goods to a person who agrees to pay a certain sum periodically and if he continues to pay the sums regularly he will become the owner of the goods on the payment of the last instalment by which he is said to exercise the option of purchasing the goods. The ownership continues to remain with the owner till the payment of the last instalment. If the hirer commits default in payment of any instalment, the owner can terminate the agreement, and take away the goods. Even if the hirer becomes insolvent, the goods will not vest with the Official Assignee but will have to be delivered to the owner.

The distinction between a hire-purchase agreement and a sale where the price is agreed to be paid in instalments is thus very fine and will depend on whether the party has merely an option to purchase or whether he has bought or agreed to buy the goods.

In Johar and Co. v. Deputy Commercial Tax Officer, AIR 1965 SC 1082, the Supreme Court observed: "In the case of a sale in which the price is to be paid by instalments, the property passes as soon as the sale is made, even though the price has not been fully paid and may later be paid in instalments. This follows from the definition of sale in section 4 of the Indian Sale of Goods Act (as distinguished from an agreement to sell) which requires that the seller transfers the property in the goods to the buyer for a price. The essence of a sale is that the property is transferred from the seller to the buyer for a price, whether paid at once or paid later in instalments, on the other hand, a hire-purchase agreement, as its very name implies, has two aspects. There is first an aspect of bailment of the goods subjected to the hire-purchase, and there is next an element of sale which fructifies when the option to purchase, which is usually a term of hire-purchase agreements is exercised by the intending purchaser. Thus the intending purchaser is known as the hirer so long as the option to purchase is not exercised, and the absence of a hire-purchase agreement properly so-called is that the property in the goods does not pass at the time of the agreement but remains in the intending seller, and only passes later when the option is exercised by the intending purchaser. The distinguishing feature of a typical hire-purchase agreement is that the property does not pass when the agreement is made but only passes when the option is finally exercised after complying with all the terms of the agreement".

In Shyam Kumar Verma v. S.P. Misra, A took a new Hind Gents Cycle from B, a cycle dealer. It was agreed that A would pay Rs. 12/8/ per month and when a total of Rs. 148/- had been paid. A would become the owner of the cycle. In pursuance of the agreement A paid a sum of Rs. 72/8/ and thereafter stopped making the payment. Thereafter B filed a suit against A to recover a sum of Rs. 272/4, which he alleged were the hire charges for 23 months due from A from the date when A had stopped making the payment. According to B, it was a hire-purchase agreement which had not yet been dispensed into a sale. A, on the other hand, contended that it was a contract of sale wherein the payment of Rs. 148/- as the price of the cycle had to be made by instalments and therefore, he was bound to pay only the balance of Rs. 75/8/-. The Allahabad High Court held that the test, to whether the hirer has the option to terminate the bailment at any time he likes, and secondly; whether, on default of any payment by the hirer, the owner of the article has reserved the right to terminate the agreement and resume the possession of the article. It is only when either of these elements is there in a contract, it can be termed as a hire-purchase agreement. In this case as neither A had the option to terminate the bailment at his choice, nor B had the option to seize the cycle on default of payment of an instalment by A, it was held to be a transaction by way of sale and A was bound to pay only the balance of the price, i.e.. Rs. 75/8/-.

Ans. (b)(ii) - Sale distinguished from Barter or Exchange - In-sale consideration must be consideration known as 'Price'. If goods are given in exchange for goods, it is known as barter or exchange.

In Aldridge v. Johnsone it has been held that when the two articles to be exchanged with one another are valued and the difference of the amount is also paid in cash the transaction may be termed a sale. In that case, A transferred 32 bullocks valued at pound 192 and paid cash of pound 23 to K, in exchange for 100 quarters of barley valued at pound 125 transferred by K to A. It was held to be sold. If, however, without valuing the goods in question the above-stated transaction had been made, it could not amount to a sale.

Q. 2 Answer the following referring to relevant provisions of law and reasoning:

Q. (a) A was shopping in a supermarket he picked up a bottle of soft drink from a shelf with the intention to buy it. While he was examining it, the bottle exploded in his hand and injured him. A sued both the management of the supermarket and the company which had bottled the drink, to re-cover damages for breach of a condition arising from the sale of food. Will he succeed?

Ans. Section 4 of the Sale of Goods Act enacts that "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." As in the case of an advertisement, catalogue or price list of goods, a shopkeeper is not bound to sell the goods displayed in the shop to the customer who makes an offer to buy. Even in the Super Market or self-service shop, the invitation to treat will not bind the seller into effecting the sale of the goods chosen by the buyer.

Therefore, a customer who picks up goods in a self-service shop is merely offering to buy them and the sale is not complete until they are paid for. Therefore, in the case in hand, there is no sale of the bottle of soft drink picked up from a shelf of the supermarket by A. Hence, the question of implied warranty of "merchantable quality" does not arise as the same is attracted only when the sale is concluded

(a (b) A agrees to sell B ten bales of Egyptian cotton out of 100 bales lying in his godown. The godown had been destroyed by fire at the time of the contract. A is unaware of this fact. Who is to bear the loss? Give reasons.

Section 7 of the Sale of Goods Act, 1930, provides as under:

"Goods perishing before making of contract.-Where there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract."

This rule applies subject to the following conditions:— (1) The contract must be for the sale of "specific goods". "According to section 2 (14) 'specific goods' means goods identified and agreed upon at the time a contract of sale is made.”

(2) They must have perished before the contract is made and without the knowledge of the seller.

In Barrow Lane & Bailard v. Philips, (1929) 1 KB 574, there was a contract for the sale of a parcel of 700 bags of Chinese groundnuts. It was unknown to the seller that 109 bags had been stolen at the time of the contract. The seller delivered the remaining 591 bags and, on the buyers' refusal to take them, brought an action for the price. It was held that the buyers were not liable to take or pay for the goods. The buyers had contracted to buy a specific quantity and to ask them to take less would be to compel them to do what they had not contracted to do. The contract had accordingly become void by reason of the loss of the goods.

The principle of section 7 does not apply where the seller had knowledge of the destruction of the goods. In that case, he must make his contract good or pay compensation for its breach, except where the buyer also knows that the goods have perished. This principle also does not apply where the sale is not of specific goods but of generic goods.

In the case in hand, the contract is void since the subject matter of the contract had already perished before the making of the contract. Thus A must bear the loss.

(c) What are the effects of goods perishing before sale but after an agreement to sell?

Ans. - Goods perishing before sale but after an agreement to sell (Section 8) - According to section 8 when there is an agreement to sell specific goods and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided. This provision is applicable when the goods sold are specific and there is merely an agreement to sell. In such a case if the goods perish or are damaged to such an extent so that they no longer answer to their description in the agreement, and such loss or damage occurs without any fault on the part of either of the parties and before the risk passes to the buyer, the agreement is thereby avoided.

Section 8, it may be noted, deals with a contract which is valid when made but becomes void from the time when the goods perish or get damaged. Moreover, under this section, the contract will be avoided if the goods perish etc. after making an agreement to sell and before the sale. If there has been a sale, i.e., the proper in the goods has passed to the buyer or the risk has passed to the buyer the contract will not be avoided. Thus, if a buyer took a horse on a trial for 8 days and the horse died within the period without any fault of the buyer, the contract, which was in the form of an agreement to sell, became void and the seller could not recover the price of the horse from the buyer

(d) A agrees to sell to B 100 bags of flour which are in his store room. Before the date of delivery, the store room of A got flooded with water? Consequently, the 100 bags of flour get destroyed. Does B have any right against A?

Ans. Section 8 of the Sale of Goods Act provides. Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided.

In the case in the hand, there is an agreement of sale only. The subject matter of the agreement, i.e. bags of flour has been damaged with flooded water without any fault of either of the parties. Therefore. B has no right against A.

Further section 24 of the Act lays down as under:

"Goods sent on approval or "on sale or return".-When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the property therein passes to the buyer-

(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time."

In Elphick v. Barnes, (1880) 5 CPD 321, a horse was delivered to the defendant on terms that he should try it for eight days and then return it if he did not like it. The horse died on the third day without the fault of the defendant.

The seller could not recover the price from the defendant, the horse, being still his property when it perished. Thus, in view of the above-discussed case, Z is not entitled to recover the price of the horse from X since the property in the horse had not passed to X before his death.

(e) A sells a scooter to B. When B goes out with the scooter he is arrested by the police on the charge of keeping stolen property; as the scooter belongs to C. Can B sue A and for what remedy, if any?

Ans. Section 27 of the Sales of Goods Act. contain very important principle of contract of sale, which is described by the maxim "Nemo dat quod non habet" which means that nobody can give what he himself has not got. Section 27 of Act provides:

"Subject to the provisions of this Act and of any other law for the time being in force, 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 then the seller had..."

Therefore in the case at hand, when A sells the scooter to B, A had no title or authority to sell the scooter, therefore B had not got a good title of the scooter. So B is certainly entitled to recover the price, which B paid to A

(f) A delivers a piece of jewellery to B on approval specifying that in case of non-acceptance it should be returned within 15 days. B begins to use the jewellery without communicating his acceptance. After 10 days the jewellery is stolen from B's house. Can A recover the price of the jewellery from B?

Ans. Section 24 of Sales of Goods Act says "When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer

(a) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction.

(b) If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time."

So when the goods are sold on an approval basis or sale or return basis, property in goods does not pass to the buyer, on delivery of goods it passes (1) when the buyer signifies his acceptance or

(2) when the buyer adopts the transaction or

(3) when Beyer does not return the goods after the stipulated time or a reasonable time

section 42 of the Act is important here which says ".The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them or when the goods have been delivered to him and do any act in relation to them which is inconsistent with the ownership of seller..."

In case in hand also 'B' after having taken the delivery of jewellery from the seller on an approval basis started using the jewellery which implies that 'B' has adopted the transaction, therefore property in goods passes to B. therefore if the jewellery is stolen, then B has to sustain the loss and A can recover the price of the jewellery.

Q.3. What are the types of goods? Discuss the rules relating to the passing of property in case of the sale of specific and uncertain goods.

Specific Goods

As per Section 2(14) of the Sale of Goods Act, 1930, specific goods are those goods which are specifically identified and ascertained by the buyer that he intends to buy at the time when the contract of sale is formulated.

For example, Deepak wants to sell his old guitar. He put an advertisement in the local newspaper with its picture, make and other details. Rahul agrees to buy the guitar and thereby formed a contract with Deepak. The guitar is a ‘Specific Good’ in this case.

Ascertained Good

Ascertained goods are not defined under the Sale of Goods Act, 1930 and many jurists have considered specific Goods and ascertained Goods as alike. However, ascertained goods can be called those goods which are specifically selected from a large set of goods.

For example, Deepak went to buy oranges in a wholesale market. He specifically selected 300 oranges from a larger set of unspecified oranges. These 300 oranges will be ascertained goods.

Unascertained Good

Unascertained goods are those goods which are not specifically identified by the buyer at the time when the contract for sale is formulated.

For example, Deepak from his 300 oranges wants to sell 100 oranges; however he doesn’t specify which oranges he wants to sell. This is called a sale of unascertained goods.

Future Goods

As per Section 2(6) of the Sale of Goods Act, 1930, future goods have been characterised as those goods which at the time of formation of the contract will either be “manufactured, produced or acquired by the buyer”. There will not be an actual sale in the sale of future goods, it will always be an “agreement to sell”. For example, Deepak has an orange grove with oranges in it. He agrees to sell 500 oranges to a buyer once the oranges are ready for market. This is a sale which will happen in the future. However, the goods have already been identified along with the agreement to sell. Such goods are known as future goods.

Contingent Goods

Contingent goods are a subtype of future goods. In contingent goods, the sale happens in the future. The sale will always come with some contingency clause in it. For example, if Deepak sells his oranges from his orange grove when the trees are yet to produce oranges, then the oranges are contingent good. This sale of contingent goods will be dependent on a condition that the trees will produce oranges, which may or may not happen.

Legal Principles regarding Transfer of Goods

There are four principles regarding the transfer of goods under the umbrella of The Sale of Goods Act, 1930, which the article will be talking about and they’re as follows:

Transfer of property in sale of Specific or Ascertained Goods

Section 19 to section 22 of The Sale of Goods Act, 1930 are a few sections which govern the transfer of goods in a case where the goods are specific and ascertained in nature:

The property when intended to pass (Section 19)

Section 19 of The Sale of Goods Act, 1930, is divided into further subsections and they’re as follows:

1. Where a contract for sale of ascertained or specific goods exists, a specified time is fixed as per the convenience and consensus of both the parties at which the property is intended to be transferred from the seller to the buyer.

2. One has to pay attention to the circumstances and conduct of both the parties to the contract in order to understand the true intention of the contracting parties. Also, the terms of the contract should be given equal importance in the existing case.

3. Except if an alternate intention shows up, the principles laid under the Section 20 to 24 of the Act will help in finding out the intention of the contracting parties in respect with the time at which the goods are about to get transferred from the seller to the buyer.

Specific goods in a Deliverable state (Section 20)

Section 20 of The Sale of Goods Act, 1930 relates to specific goods in a deliverable state, and it states:

In a contract for the sale of specific goods, which is unconditional in nature, the goods are transferred from the seller to the buyer at the time of formation of the contract. However, the only precondition required for the transfer of property is the fact that the goods must be existing in a deliverable state. The delay in the payment or delivery of goods or both is not something which holds importance.

Example: A goes to a big electronic shop in order to buy a television set. He selects a big plasma Television set and asks the shopkeeper to deliver the television at his house which is at the other end of the town. The shopkeeper agrees to it. With this, “A” will become the owner of the television, and the Television set will become his property.

Specific goods to be put into a deliverable state (Section 21)

Section 21 of The Sale of Goods Act, 1930: certain goods to be put in a deliverable state:

Where there is an existence of a contract for the sale of specific goods, the property concerned in the transaction will only be passed to the buyer, if the seller performs the necessary acts and omissions in order to put the goods in a deliverable state. Also, it is mandatory for the seller to notify the buyer regarding the alterations.

Example: A goes to a mall to buy a smart television from an electronics store. He selects a big fancy smart TV from the electronic section and asks for its home delivery. The manager agrees to deliver it to A’s home. However, at the time where he selects the smart TV, it doesn’t have an operating system installed. The manager promises to install the operating system and on the next day, he informs “A” that his smart TV is now installed with the operating system and is ready for its delivery. Further, he asked for his permission to make the delivery.

In order to summarize the example, the goods will only be transferred to “A” if the manager has installed the operating system making the smart TV ready for its use.

Specific goods are in a deliverable state but the seller has to do something to ascertain the price (Section 22)

Section 22 of The Sale of Goods Act, 1930: Specific goods are in a deliverable state but the seller has to do something to ascertain the price:

Where there is a contract for the sale of specific goods in a deliverable state, the seller is undoubtedly bound to weigh, measure, test or do the necessary demonstration or anything which is required in reference with the sale of those particular goods. He’ll be doing this to ascertain the appropriate value of the goods. The property in the goods will not pass until such demonstration or particulars are done and the buyer has acknowledged it thereof.

Example: Rishabh sells a wooden bed to Deepak and agrees to assemble it in Deepak’s bedroom as it was a part of the agreement. Rishabh delivers the wooden bed and makes a call to him informing Deepak that he will assemble the wooden bed the next day. That night the wooden bed gets stolen from Deepak’s premises. In this case, Deepak will not be liable for the loss since the wooden bed was not passed to him. According to the terms of the contract, the wooden bed would be in a deliverable state only after it is assembled.

Transfer of property in sale of Unascertained Goods

Section 23 of The Sale of Goods Act, 1930 govern the transfer of goods in a case where the goods are unascertained in nature:

Sale of unascertained goods and appropriation (Section 23)

Section 23 of The Sale of Goods Act, 1930, is divided into further subsections and they’re as follows:

Section 23(1) Sale of unascertained goods by description:

In a contract, for the sale of unascertained goods by description, if goods of a specific description are appropriated either by the seller with the consent of buyer or by the buyer with the consent of the seller, then the goods are passed to the buyer. The consent can be expressed or implied and can be given before or after the appropriation is made.

Section 23(2) Delivery to the carrier:

The seller has unconditionally appropriated the property if he delivers the property to the buyer/ carrier/ bailee for the reason of transmission to the buyer, however, he doesn’t reserve the disposal rights to the property, then it can be said that he has appropriated the contract.

Goods sent on “sale or return”

When goods are disposed on the basis of “sale or return” by the seller, the ownership of the goods aren’t transferred to the buyer unless the buyer gives assent to the goods. However, if these goods are held by its buyer without giving an approval then they’re taken as goods whose ownership is yet to be transferred. In that case, they’re treated as goods which belong to the seller and not the buyer.

Goods sent on approval or “on sale or return” (Section 24)

Section 24: In a case where the goods are delivered to the buyer either on approval or on “sale or return” or on other comparable terms then:

(a) The goods therein will only pass to the buyer if the buyer either portrays his consent or acknowledges to the seller or does any act by which the transaction would be adopted.

(b) The goods therein will only pass to the buyer if the buyer doesn’t express his consent or acknowledgement to the seller that he intends to reject the goods, however, holds the goods without giving a notice to the buyer then on the expiration of time frame for the return of the goods or if time hasn’t been fixed, then on the completion of a reasonable time, the property will be passed to the buyer.

Example: “A” the seller of a precious necklace gives it to “B” the buyer on “Sale or return” basis. B after observing the necklace finds it very beautiful and put forth his consent on buying the necklace. In this case, the goods will be transferred to the buyer. However, if the buyer doesn’t wish to give the acknowledgement for the product then the goods shall be duly returned back to B.

In case of right to disposal

The intention behind reserving the right of disposal of the goods is to make sure that the value of the product is paid before the property is transferred to the buyer. However, under the prepared value system, the ownership follows the possession. That is to say, the seller transfers the possession of the goods but retains the ownership until the buyer pays the appropriate amount.

Reservation of Right to Disposal (Section 25)

Section 25 of Sale of Goods Act, 1930 deals with the conditional appropriation of goods and is bifurcated into the following subsections:

Section 25(1): As per the terms and conditions of the contract the seller of goods reserves the right of disposal of the goods in a situation where the sale of specific goods is concerned. Despite the delivery of the goods, the goods will not get transferred from the seller to the buyer unless the subsequent terms of the contract aren’t appropriated or fulfilled.

For example, A sends certain goods by rickshaw to B and instructs the rickshaw driver not to deliver the goods until B pays him the price which was set between them as per the agreement. The rickshaw reaches the destination in time. However, buyer “B” refuses to pay the amount as he had no money with him at the moment. Here the rickshaw driver can refuse to deliver the goods and the seller can rightly exercise his right to disposal.

Section 25(3): A few perspectives pertaining to the transfer of property during a sale of goods or property are encapsulated in the Sales of Goods Act, 1930. The liabilities of the buyer and seller are determined in consonance with the provisions enshrined in sections 18 to 25 of The Sale of Goods Act. The concept of possession of goods differs from passing of the goods as the latter in essence means the transfer of ownership from the seller to the buyer while the former is confined to the custody of goods.

Q. 4 Distinguish between condition and warranty. When does the condition become warranty? Explain by giving an illustration.

CONDITION AND WARRANTY

Sections 11 to 17 of the Sale of Goods Act, 1930 deal with conditions and warranties.

Every contract of sale is likely to contain a number of terms and stipulations about the nature and quality of goods and their fitness for the buyer's purpose. Every such term is not likely to be of equal importance. Some of them constitute the hard core of the contract and their non-fulfilment may seem to upset the very basis of a contract. They may be so vital to the contract that their breach may seem to be a breach of the contract as a whole. Such terms are known as conditions of contract and their breach entitles the innocent party to repudiate the contract. A term which is not of such vital importance is known as warranty. A breach of warranty does not lead to repudiation, but only to damages for breach.

Section 12(1) of the Sale of Goods Act provides that a stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

Condition-A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated [Section 12(2)].

Warranty-A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not right to reject the goods and treat the contract as repudiated [Section 12(3)].

Further section 12 (4) of the Act lays down-

"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".

Difference between condition and warranty

(1) Where the fulfilment of the main purpose of the contract depends on the fulfilment of the stipulation, the stipulation is a condition and where it is not so, the stipulation is only a warranty.

(2) Where there is a breach of condition, the contract may be repudiated, and the aggrieved party may refuse to perform his own obligation and either treat the contract as closed or bring an action for breach of contract. But in the case of warranty, the contract cannot be repudiated, but a claim for damages may be filed.

Illustrations

(a) In Niblett v. Confectioner's Materials Co., (1921) 3 KB 387, (CA): (1921) All ER Rep 459 the defendants sold to the plaintiffs 3,000 tins of condensed milk. On their arrival in England from New York it was found that 1,000 tins were labelled 'Nissly brand'. Another manufacturer of condensed milk under the name of 'Nestle brand" claimed that this was an infringement of his trade mark. The plaintiff had to remove all the labels in order to obtain the goods and subsequently sold them at a reduced value. He sued the sellers for the breach of the condition as to title. It was held that the plaintiff had the right to reject the goods or to recover as damages the loss caused by the sale at a reduced price.

(b) In Mason v. Burmingham, (1949) 2 KB 545, the plaintiff purchased a typewriter from the defendant for £20. She subsequently spent £ 11 on overhauling it. Unknown to the parties, the typewriter had been stolen property and the plaintiff had to return it to the owner. It was held that there was a breach of warranty implied in the contract of sale that the buyer should have and enjoy quiet possession of the goods, and as such the plaintiff was entitled to recover the price paid and also the cost of overhauling.

(c) In Antony Thomas v. Ayappunni Mani, AIR 1960 Ker 176, a contract for sale of cashew nuts contained a term that bad nuts shall not exceed 20 \% of the total. The buyer entered into the contract relying upon that description. Held, the sale was by description and term as to percentage was a basic element of the description of goods, and the buyer was entitled to reject the goods if the bad nuts exceeded the stipulated percentage, and could claim a refund of price.

(d) A buys by sample, 100 bales of "Fair Bengal" cotton; goods according to sample were delivered. The cotton proves not to be such as is known in the market as "Fair Bengal", there is a breach of condition.

Nothing in this section shall alter the case of any condition or warranty, fulfilment of which is excused by law by reason of impossibility or otherwise [Section 13(3)].

Where a contract of sale is not severable 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, express or implied to that effect, [Section 13(2)].

When a condition is to be treated as a warranty where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated [Section 13(1)].

Q. 5 What s meant by sale by sample? What are the conditions implied in such a sale?

Sale by sample conditions implied in such a sale

Section 14 of the Sale of Goods Act, 1930 lays down as under-

Implied undertaking as to title etc -ln a contract of sale, unless the circumstances of the contract are such as to show a different intention there is-

(a) an implied condition on the part of the seller that, in the case of a sale, he has a night so sell the goods and that 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,

(b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods. (c) 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".

A noteworthy feature of the Sale of Goods Act is that it spells out the various conditions and warranties which are implied in every contract of sale, in the absence of a contract to the contrary The implied conditions are discussed below;

The condition that the seller has title to the goods

The first and foremost condition implied in every contract of sale is that the seller has the right to sell the goods. If the title is defective, the buyer is entitled to reject the goods. The law in this regard is laid down in section 14 (a), 'In a contract of sale there is an implied condition on the part of the seller that, in the case of a sale he has a right to sell the goods, and that 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'.

Thus, in Rowland v. Dival, (1923) 2 KB 500 (CA), it was held that a buyer of a motorcar who was deprived of the same owing to the seller's want of title was entitled to recover the full price from the seller, even though he had the car for some months, as the consideration had totally failed.

The condition that goods shall correspond with the description

Section 15 lays down as under-

"Sale by description.-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, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description".

Held it was sale of goods by description and the buyer was entitled to reject it. This condition applies to both private sales and sales by dealers of goods sold.

There is a sale by description even though the buyer is buying something displayed before him in the counter, a thing is sold by description, though it is specific, so long as it is sold not merely as the specific thing, but as a thing corresponding to a description, e.g., woollen undergarments, hot water bottles, a second-hand reaping machine etc.

Goods are sold by description when the contract describes them and the buyer contracts, relying on that description.

Condition as to the merchantable quality

The goods purchased, while corresponding to the description, should also be of a merchantable quality i.e., of a quality that is accepted in the market.

Section 16 (2) of the Sale of Goods Act stipulates:

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

Provided that, if the buyer had examined the goods, there shall be no implied condition as

regards defects which such examination ought to have revealed".

Meaning "merchantable"

The House of Lords in Henry Kendall and Sons v. William Lillico and Sons Ltd., 1969(2) AC 31 (75), has held that the goods should be in such a state that a buyer, fully acquinted with the facts, and therefore, knowing what hidden defects exist and being limited to their apparent condition; would buy them without abatement of the price obtainable for the goods if in reasonably sound order and without special terms.

Lord Reid added that what is meant by "merchantable quality" is that the goods in the form in which they were tendered would not have been used by a reasonable man for any purpose for which goods which complied with the description under which these goods were sold should normally be used; and hence were not saleable under that description.

In Tackson v. Rotax Motor and Cycle Co., 2 KB 937, a substantial portion of motor horns delivered to the buyer, were badly dented owing to bad packing, while the rest were badly polished owing to careless workmanship, and consequently, not saleable. Held the goods supplied were not of merchantable quality and that the buyer could reject the whole consignment.

In Grant v. Australian Mills Ltd., (1936) 70 MLJ 513:159 IC 667, the plaintiff (buyer) purchased underpants from a company dealing in these goods, and after wearing them contracted a skin disease on account of some defect in their manufacture. It was held that the underpants were not merchantable, under section 14 (i) and (ii) of the Australian Sale of Goods Act corresponding to section 16(2) of the Indian Act, as they could not be worn next to the skin, and that the company which sold them was liable for damages.

While the rule is that if, the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed however, if examination by the buyer does not reveal the defect and he approves and accepts the goods, but when put to work the goods are found to be defective, there is a breach of the condition of merchantable quality.

Condition as to wholesomeness or fitness for consumption

Even though the Sale of Goods Act makes no express reference to the above condition, the condition as to merchantability must be deemed to include fitness for consumption in the case of provisions.

Section 17(1) of the Sale of Goods Act provides:

"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".

Thus, it is clear that the mere fact that a seller provides a sample for inspection by the buyer would not be enough to constitute a sale by sample. To constitute a sale by sample, there must be an express or implied form in the contract to that effect.

However, where the contract is silent on the point, but custom or usage provide that in respect of certain commodities, sale would be by sample then custom or usage will prevail.

The implied conditions in a contract of sale by sample

(1) Bulk should correspond with sample

Whenever goods are sold by sample it is only reasonable to expect that the buyer should have an opportunity to examine them and that they should correspond with the sample.

(2) Buyer to have a reasonable opportunity to compare

In a sale by sample, the buyer shall have a reasonable opportunity to compare the bulk with the sample. Acceptance of the goods will arise only after such a comparison. The buyer can reject the goods even after they have been delivered if the bulk does not correspond with the sample.

In Perkins v. Bell, (1893) 1 QB 193 (CA), P sold barley to B by sample, delivery to be made at T railway station. The barley was delivered at Trailway station and S after inspecting a sample of barley, sent it on to X. X rejected it as not being according to the sample. B seeks to reject the goods. Held B cannot reject the barley. B's action in inspecting the barley and then ordering it to be sent on to X was an acceptance of the goods.

(3) Condition of merchantability as to latent defects

According to section 17(2), the goods shall be free from any defect rendering them un-

merchantable, which would not be apparent on a reasonable examination of the sample. In Drummond v. Van Ingen, (1887) 12 App Cas 284, there was a sale by sample of mixed worsted cloth, to be in quality and weight equal to the samples. The cloth was found to have a defect in the texture, rendering it unfit for stitching into coats. The seller was held liable, even though the same defect existed in the sample, which was examined and the defect could not be discovered.

Q. 6. "Risk prima facie passes with the property." Explain the statement and state exceptions, if any.

Section 26 of the Sale of Goods Act, 1930 lays down as under:

"Risk prima facie passes with property.-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:

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

Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party."

Illustrations

(a) A manufacturer contracted to supply 30 tons of apple juice in accordance with sample, to a wine merchant, to be delivered in weekly truck loads. He crushed the apples, put the juice in casks and kept it pending delivery. After 20 tons had been delivered, no further deliveries were made through the delay of the buyer in breach of the contract notwithstanding requests for delivery instructions from the seller, and ultimately the undelivered juice went putrid and had to be thrown away. It was held and the juice was assembled by the seller in fulfilme or the contract and kept ready for delivery as and when the buyer proposed to take it. After the delay, therefore, the juice was at the risk of the buyer who must suffer the loss; Demby Hamilton & Co. Ltd. v. Barden (Endeavour Wines Ltd., (1949) 1 All ER 435.

(b) A buys goods of B and property has passed to him, but the goods remain in B's warehouse and the price is unpaid. Before delivery, a fire destroys the goods. A must pay B the price as A was the owner.

Though "risk" and "property" generally go together, 'the two are not inseparable'. Sometimes 'risk' may be in one party and 'property' in another.

Thirdly, "risk" and "property" may be separated by the agreement of the parties.

Fourthly, "risk" and "property" may be separated by a term of the contract. In Consolidated Coffee Ltd. v. Coffee Board, (1980) 3 SCC 358, one of the terms adopted by the Coffee Board for auction of coffee was that the property in the coffee knocked down to a bidder would not pass until the payment of full price and, in the meantime, the goods would remain with the seller but at the risk and responsibility of the buyer. The clause was regarded as valid and effective.

Exceptions to the principle

1. Where the delivery of goods has been delayed through the fault of either buyer or seller the goods are at the risk of the party in fault.

2. The principle shall not effect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.

3. Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer shall, nevertheless, take any risk of deterioration in the goods necessarily incidental to the course of transit. This is however subject to contrary agreement between the parties.

4. The parties may provide in the contract that the property shall be at the risk of the buye although the same may not have passed to him.

. A purchased rice from B being the whole content of a godown. A had paid earnest money and had taken delivery of a part of rice. Before the rest could be taken away, it was destroyed by fire. Who will bear the loss?

This problem comes under Section 26 of Sales of Goods Act.

Section 26 speaks about the risk that prima facie passes with the property. Section 26 says that 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:

Provided also that nothing in this section affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.

In the case of Shashi Mohan v. Nobo Kristo, where the defendant purchased 975 bales of rice, being the whole contents of a gola, paid earnest money, and took part delivery of the rice and the rest was destroyed by fire, it was held that the property in the whole had passed to him and he was liable by the balance of the price.

In the case in hand where A purchased rice from B being the whole content of a godown. A had paid earnest money and had taken price delivery of a part of rice. Before the rest could be taken away, it was destroyed by fire. Therefore, the buyer will bear the loss.

Q.7 “NEMO DAT QUOD NON HABET” Explain.

Section 27 of the Sale of Goods Act, 1930 provides that "Subject to the provisions of this Act and of any other law for the time being in force, 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 than the seller had unless the owner of the goods, is by his conduct precluded from denying the seller's authority to sell".

The general rule that no man can pass a better title than he himself has is enshrined in the maxim, nemo dat quod non habet. Section 27 embodies this principle.

In Farguharson Bros v. King & C_{0} , [1902] AC 325 (336), it was observed that if a person leaves a watch or a ring on a seat in the park or on a table at a cafe, and it ultimately gets into the hands of a bona fide purchaser, it is no answer to the true owner to say that it was his carelessness and nothing else, that it enabled the finder to pass it off as his own.

In section 27 of the Sale of Goods Act, it has been specifically stated that a person buying goods from one who is not the owner thereof and who does not sell them with his consent acquires no better title to the goods than the seller has. In Bishopsgate Motor Finance Corporation Ltd. v. Transport Brakes Ltd., [1949] 1KB 322, 336: [1949] 1 All ER 37 (46), it was observed by the Denning L.J.:

"In the development of our law, two principles have striven for mastery. The first is the protection of property: no one can give a better title than he himself possesses. The second is the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle held sway for a long time but it has been modified by the common law itself and by state so as to meet the needs of our times."

Sections 27 to 30 of the Sale of Goods Act contains certain exceptions to the principle that "no man can pass a better title than he has". These are:

Sale by mercantile agent

A mercantile agent can convey a valid title to goods though he is not the owner thereof, provided the following conditions are satisfied:-

(a) The person selling must be a mercantile agent. Factors, brokers, and auctioneers are all mercantile agents.

(b) He should be in possession of goods, or document of title to goods. Document of title to goods according to section 2(4) includes a bill of lading, dock warrant, warehouse-keeper's certificate, railway receipt, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession on control of goods or authorising or purporting to authorise, either by endorsement or delivery, the possessor of the document to transfer or receive goods thereby presented.

(d) The mercantile agent must sell in the ordinary course of business as mercantile agent.

(e) The buyer must act in good faith.

(f) The buyer should not have had notice that the seller had no authority to sell.

A, a jeweller, was entrusted with a diamond by P with instructions that A should obtain offers for it, and if any such offer was approved by P. A should sell it to the offerer. Acting contrary to Ps instructions, A sold the diamond to S who bought it in good faith. Thereafter A absconded with the price money. P sued S for recovery of the diamond. Held, P cannot recover the diamond from S as the sale was made by A the jeweller, as a mercantile agent in the ordinary course of his business, though contrary to P's instructions.

Sale by one of joint owners Section 28 stipulates - "If one of the several joint owners of goods has the sole possession of them by permission of the co-owners, the property or the goods is transferred to any person who buys them of 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."

Thus if one of several joint owners holds a precious stone in his capacity with the permission of the co-owners, a buyer in good faith and with no knowledge of defective title will get a good title to the precious stone.

Sale by a person in possession under a voidable contract

Section 29 states-

"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".

The rule enunciated in the above section pre-supposes a contract and will not be applicable if there is no contract.

Seller or buyer in possession after sale

Section 30 provides that "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 authorised by the owner of the goods to make the same,"

Where a person having bought or agreed to buy goods obtains with the consent of the seller. possession of the goods of the document of title, the delivery or transfer by that person or by a mercantile agent acting for him, or 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 any lien or other right of the original seller in respect of the goods, shall have effect as if such lien or right did not exist.

In Marten v. W. Whale, (1917) 2 KB 480, A agreed to buy a car from B and pay Rs. 8,000 for it, if his solicitor approved, A took possession of the car and sold it to C. The solicitor subsequently disapproved of the transaction. B sued C for the recovery of Rs. 8,000. Held, B cannot recover the price of the car. C the bona fide buyer, got good title, for A agreed to buy it. It was a sale by a 'buyer in possession'.

Q. 8 Explain the provisions relating to unpaid seller lien and stoppage in transit.

Ans. Section 45 of Sales of Goods Act says that An Unpaid Seller is a person to whom the whole of the price has not been paid or tendered or 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 the reason of the dishonor of the instrument.

UNPAID SELLER'S RIGHT OF STOPPAGE IN TRANSIT

Section 45 of the Sale of Goods Act, 1930, defines the unpaid seller as "Unpaid seller" defined.

(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.

(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".

A seller who has only received a part of the price is also an unpaid seller. Where the seller has received a negotiable instrument, like a bill of exchange, promissory note or cheque, for the price, he is not an unpaid seller. But if, before he has delivered the goods, the negotiable instrument is dishonoured, then he becomes an unpaid seller and may exercise the rights. This is so because a negotiable instrument is always presumed to have been received as conditional payment and the condition is not fulfilled when it is dishonoured.

Illustration

The seller draws bills for the price of the goods on the buyer, who accepts them, and these negotiates them. Before the bills arrive at maturity the buyer fails. The seller is in the position of unpaid seller.

Rights of Unpaid Seller

Section 46 of the Sale of Goods Act, 1930 provides "Unpaid Seller's rights-(1) Subject to the provisions of this Act and of any law for the being in force, notwithstanding that the property in the goods may have passed to the bayer 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 I the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them;

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

The rights of an unpaid seller do not depend upon any agreement, express or implied, between the parties. They arise by implication of law. In Bloxam v. Sanders, 4 B&C 941, Bayley J. has observed "The buyer has no right to have possession of the goods till he pays the price. The seller's righ in respect of the price is not a mere lien which he will forfeit if he parts with the posse but grows out of his original ownership and dominion, and pay mentor a tender of the price is a condition precedent on the buyer's part and until he makes such payment or tender, he ha no right to the possession."

(1) Lien on the goods

Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them a 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 rent, but the term of credit has expired;

(c) where the buyer becomes insolvent [Section 47(1)]. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer [Section 47(2)].

'Lien' is the right to retain possession of goods until certain charges due in respect of them are paid The unpaid seller has the right to retain the goods until he receives their price. The seller's lien is a possession/lien, Le.. the lien can be exercised so long as he is in possession of the goods. Further, the lien can be exercised for the non-payment of price and not for any other charges. If the unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder unless such part delivery has been made under such circumstances, as to show an agreement to waive the lien

(2) Right of stoppage in transit

This right accrues where the unpaid seller has parted with the goods, which are in transit and the buyer has become insolvent.

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 say, he may resume possession of the goods as long as they are in the course of transit, and may retin them until payment or tender of the price [Section 50]

The essential feature of a stoppage in transit is that the goods should be in the possession of a middleman, or some person intervening between the vendor who has parted with and the purchaser who has not yet received them.

Requirements of stoppage in transit

(1) (i) That the seller should be unpaid;

(ii) that the buyer should have become insolvent;

(iii) that the property should have passed to the buyer, for, if the seller reserves the right of disposal, the goods remain his property, and, therefore, under his lien;

(iv) that the goods should be in the course of transit.

(2) Goods are deemed to be in transit so long as they are in the possession of the carrier or bailee for the purpose of transmission to the buyer, it is only when the buyer or his agent obtains possession of the goods at the place of destination or at some other place before they arrive at the place of destination within the transit, is said to be at an end. The transit continues so long as the carrier holds as such, i.e., as a carrier and not as a buyer's agent.

(3) Right of re-sale

Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, 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 occur on the re-sale. If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale. [Section 54(2)].

The right of re-sale implies that the property in the goods has passed to the buyer. Unless the property in the goods has passed to the buyer the seller cannot exercise his right of re-sale; P.S.N.S. Ambalavana Chhettiars & Co. Ltd. v. Express Newspapers Ltd., AIR 1968 SC 741. In exercising his right of re-sale the seller continues his capacity as an unpaid seller and he does not thereby become an agent of the buyer; Dhanrajmal Govindram v. Sharma Kalidas & Co., AIR 1961 SC 1285: 64 Bom LR 169.

(4) Suit for price

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 according to the terms of the contract, the seller may sue him for the price of the goods [Section 55(1)].

Where under a contract of sale the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract [Section 55 (2)].

- (b) A purchases a hot water bottle from a chemist mentioning the specific purpose for which he requires it. The bottle, while being used by A's wife bursts and A's wife is injured What are the remedies of A against the chemist.

The fact of the problem are the facts of the case of Priest V. Last, (1903)2 K.B. 148 (C.A.). In that case, the plaintiff who was a draper, and had no special skill or knowledge with regard to hot water bottles went to a chemist who sold such articles, and asked for a "hot water bottle". An article was shown to him as such. He inquired whether it would stand boiling water and the defendant told him that it was meant for hot water, but would not stand boiling water. He then purchased it. Some days afterwards the bottle, while in use by plain tiff's wife, burst and she was in consequence scalded. It was held: The plaintiff had, when purchasing the bottle, made known to the defendant the particular purpose for which it was required, so as to show that he relied on skill and knowledge of the defendant. The jury had found at the trial that the bottle was not, when sold fit for the purpose of a hot water bottle. The case therefore came under Section 14(1) of the (English) Sale of Goods Act, 1893 and there was an implied warranty that the bottle was fit for the purpose of holding hot water, of which there had been a breach. The plaintiff was therefore entitled to damages.

In view of the above discussion, A is entitled to recover damages from the chemist

Q. 8 What do you understand by the expression "Caveat Emptor" ? What exceptions have been admitted to the scope of this principles? Is it true to say that the exceptions have converted the rule into "Caveat Venditor"?

Ans. Doctrine of "Caveat Emptor" as contained in Section 16 of Sales of Goods Act literally means that 'buyer beware' that means it is for the buyer to satisfy himself that the goods which he is purchasing are of the quality which he requires or if he is buying them for a specific purpose, that they are fit for that purpose. If the goods are subsequently found to be unsuitable for purpose, he cannot blame the seller for the same, as there is no implied undertaking by the seller that he shall supply such goods as to suit buyer's purpose.

In Re Andrew Yule and Co. AIR 1932 Cal. 928 sale by sample by a woollen manufacturer of indigo cloth to buyer who did not specify the purpose for which he wanted the same, it was in fact needed for packing, owing to a latent defect in the cloth it was unfit for that purpose. It was held that buyer had no right to reject the same, even if it did not suit his purpose.

It is for the buyer to satisfy himself that the goods which he is purchasing are of the quality, which he requires or, if he is buying them for a specific purpose, that they are fit for that purpose. This principle is summed up in the maxim "caveat emptor". The principle is based upon the presumption that the buyer is relying on his own skill and judgment, when he effects a purchase. The scope of caveat emptor ie. 'purchaser beware' has been explained by Fitz Gibbon L.J. in Wallis v. Russell, [1902] 2 IR 585 (615) (CA) as under:

"Caveat emptor does not mean in law or latin that the buyer must take chance', it means that he must take care. It applies to the purchase of specific things, e.g., a horse or a picture, upon which the buyer can, and usually does, exercise his own judgment; it applies also whenever the buyer voluntarily chooses what he buys; it applies also where by usage or otherwise it is a term of the contract, that the buyer shall not rely on the skill or judgment of the seller",

The maxim caveat emptor was explained in Jones v. Just, (1868) LR 3 QB 197. It was observed that in the case of sale of goods which may be inspected by the buyer and there is no fraud on the part of the seller, the maxim caveat emptor applies, even though the defect which exists in them is latent, and not discoverable on examination, at least where the seller is neither the grower nor the manufacturer. The buyer in such a case has the opportunity of exercising his judgment upon the matter, and if the result of the inspection be unsatisfactory, or if he distrusts his own judgment, he may if he chooses require a warranty. In such a case it is not an implied term of the contract of sale that the goods are of any particular quality or are merchantable.

Exceptions to the Principle of Caveat Emptor

Section 16 of the Sale of Goods Act recognises certain exceptions to the maxim of 'Caveat Emptor' The opening words of section 16 run as follows:

"Subject to provisions of this Act and of any other law for the time being in force, there is no implied condition as to quality or fitness for any particular purpose of goods sup plied under a contract of sale..."

Exceptions To Rule of Caveat Emptor; Sub-sections (1) and (2) of Section 16 of the Act lay down two exception to the rule of "Caveat Emptor" and which are implied conditions in a contract of sale:

(1) IMPLIED CONDITION AS TO QUALITY AND FITNESS : Section 16(1) says where buyer has expressly or impliedly made it known to seller, the purpose for which goods are required so as to show that buyer is relying on seller's judgement and skill and goods are of description which it is in course of seller's business to supply, then there is an implied condition that goods shall be reasonably fit for such purpose.

In a well known case Priest v. Last (1903) 2 K.B. 148 Plaintiff went to the defendant a chemist, and asked for a "Hot water bottle". Defendant sold him an American rubber bottle, plaintiff had purchased the bottle for his wife and while she was using, it burst and injured her. Since the bottle was not fit for being used as 'hot water bottle', the particular purpose, for which the buyer had purchased it, Defendant was held liable to pay compensation for the breach of implied condition.

However proviso to Section 16 (1) of Act provides that in case of a contract for the sale of a specified article under its patent or trade name, there is no implied condition as to its fitness for any particular purpose.

(2) IMPLIED CONDITION OF MERCHANTABLE QUALITY: Section 16 (2) contains second exception to the rule of "Caveat Emptor" and provides that "Where goods are bought by description from seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality.

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."

The goods are of merchantable quality if they are of such quality and in such a condition that a reasonable man acting reasonably would after a full examination accept them under the circumstances of the case in performance of the contract to buy them, whether he buys for his own use or to sell again. They should be immediately saleable under the description by which they are known in the market.

In Jackson v. Rotax Motor and Cycle Co., (1910) 2 KB 937, a substantial portion of motor horns delivered to the buyer, were badly dented owing to bad packing, while the rest were badly polished owing to careless workmanship, and consequently, not saleable. It was held that the goods supplied were not of merchantable quality and that the buyer could reject the whole consignment.

Even though the Sale of Goods Act makes no express reference to the condition as to wholesomeness or fitness for consumption, the condition as to merchantability must be deemed to include fitness for consumption in the case of provisions. In Frost v. Ayelsbury Dairy Co. Ltd., [1905] 1 KB 608, 612, F bought milk from a dairy, and the milk contained typhoid germs. F's wife became infected and died, the seller was liable for damages.

It must be noted that the rules as to fitness for purpose and merchantability do not apply to private sales and there still a fairly wide application of the maxim caveat emptor. The only condition in a private sale is that the goods must correspond with the description.

(3) Conditions implied by trade usage

An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade which must be certain and uniform.

(4) Express terms

Section 13 (3) of the Act provides-

"Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law by reason of impossibility or otherwise."

It is open to the parties to include any express conditions and/or warranties in their contract. But an express warranty or condition does not negative a warranty or condition implied by the Act unless the express terms are inconsistent with the implied conditions.

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Sale of Goods Act 1930