13

Sales of Goods Act, 1930

13.1 APPLICABILITY

In trade and commerce, sales and purchase of goods are very common transactions. These transactions may appear to be very simple but the possibilities of complications are always there. Therefore, knowledge of basic principles of sale and purchase is very much essential for all the concerned parties as well as for the entire community. The Sale of Goods Act contains the basic principles as well as the legal framework of transactions of sale and purchase.

Earlier, the Sale of Goods Act was a part of the Indian Contract Act. A separate Act was framed in the year 1930. This act extends to the whole of India, except the State of Jammu and Kashmir. This act comes into force w.e.f. 1 July 1930.

13.2 DEFINITION

13.2.1 Buyer—Section 2(1)

Buyer means a person who buys or agrees to buy the goods.

13.2.2 Seller—Section 2(13)

Seller means a person who sells or agrees to sell the goods.

13.2.3 Delivery—Section 2(2)

Delivery means voluntary transfer of the possession of goods from one person to another. Usually, the goods are delivered from the seller to the buyer. Immediate delivery of goods is not necessary or mandatory.

13.2.4 Price—Section 2(10)

Price means the money consideration for the sale of goods. The money here means the currency in circulation. Remember any contract without consideration is usually not valid.

13.2.5 Goods—Section 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 a part of the land, which are agreed to be severed before the sale or under the contract of sale.

Example

Shares, debentures, goodwill, water, fruit, sim card and newspaper are considered as goods.

13.2.6 Agreement to Sell

Where the transfer of property in goods takes place at a future date.

13.2.7 Sale

Where the transfer of property in goods takes place at the time of contract.

13.2.8 Document of Title—Section 2(4)

The document of title of goods includes the following documents:

1. The bill of lading
2. The dock-warrant
3. The warehouse keeper’s certificate
4. The wharfinger’s certificate
5. The railway receipt
6. The multimodal transport document
7. The warrant
8. The order for the delivery of goods.

In the ordinary course of business, it is a proof of the possession of goods or authorizing either by endorsement or delivery, the possessor of the document to transfer or receive the goods.

13.2.9 Property—Section 2(11)

Property means the general property in goods.

The property can be understood in two ways with reference to any goods; general property and special property. The general property in goods means ownership, while the special property means the possession or control of goods. Therefore, the transfer of property in goods is different from the delivery of goods. The delivery of goods means a transfer of special property in goods.

Example

When you pledge the jewelry with a bank as a matter of security for the repayment of the loan, you are only transferring the special property to the bank. Its general property (ownership) belongs to you.

13.3 ESSENTIALS OF VALID SALES

The essentials of a contract of sale are as under:

13.3.1 Two Parties

There must be two parties. One cannot sell to himself. The seller and the buyer must be different. A part owner can sell goods to another part owner.

13.3.2 Goods

The subject matter of the contract of sale is goods. The goods must be movable. Immovable things are out of the purview of the act. The goods may be present or future.

13.3.3 Transfer of Property

The seller transfers or agrees to transfer the property in goods. The transfer of property in goods means the transfer of general property.

13.3.4 Consideration

The price is the consideration for the contract of sale of goods. The exchange of goods for goods is barter. Exchange is partly for goods and partly for money in a sale. In case where the promissory note or the negotiable instrument is given in exchange of the transfer of goods, it will be a sale since a negotiable instrument is always paid in money.

13.3.5 Elements of Contract

All essential elements of a valid contract must be observed because basically it is a contract.

13.3.6 Form of Contract of Sale

No form of contract of sale is prescribed under the Sales of Goods Act. The contract of sale can be expressed or implied. The contract of sale may be in writing or by word of mouth. The contract of sale can be conditional or absolute.

13.3.7 Delivery of Goods

The contract of sale may provide any of the following methods for the delivery of goods:

1. Immediate delivery of goods.
2. Immediate payment of price but delivery at some future date.
3. Immediate payment of price and immediate delivery of goods.
4. Delivery or payment or both made in installments.
5. Delivery or payment or both will be made at future date.

13.4 DISTINGUISH BETWEEN A SALE AND AN AGREEMENT TO SELL

Subject Matter	Sale	Agreement to Sell
Transfer of ownership	In a sale, the ownership of goods is transferred immediately.	In case of an agreement to sell, the ownership will be transferred in future.
Nature of contract	A sale is an executed contract.	An agreement to sell is an executor contract.
If price is not paid	A seller can sue for the price. He has all the rights of an unpaid seller.	A seller can sue for damages.
Risk	The buyer bears the risk.	The seller bears the risk.
Type of goods involved	A sale takes place in the case of existing goods usually.	An agreement to sell takes place in the case of future goods.

13.5 DISTINGUISH BETWEEN A SALE AND A HIRE–PURCHASE

Subject Matter	Sale	Hire–Purchase
Meaning	It is a transaction where the ownership of goods is transferred immediately to the buyer.	It is an agreement where the hirer uses the goods on the payment of the installment and he has the option to return the goods. The ownership transfers on the payment of the last installment.
Applicable Act	Sales of Goods Act, 1930.	Hire–Purchase Act, 1972.
Parties	A contract of sale involves two parties namely the seller and the buyer.	Hire–purchase agreement involves two parties, the hirer and the hire vendor.
Mode of forming contract	A contract of sale can be made orally or in writing.	The hire–purchase agreement should be in writing.
Risk	The risk of loss passes to the buyer.	The risk of loss does not pass to the hirer as the ownership is not transferred. It will pass to the hirer when the last installment is paid.
Return of goods	The buyer cannot return goods usually.	The hirer can return the goods.
Sales Tax	The sales tax is payable immediately.	The sales tax is payable when all the installments are paid.

13.6 DISTINGUISH BETWEEN A SALE AND A BAILMENT

Subject–Matter	Sale	Bailment
Meaning	It is the transfer of property in goods for price.	It is the transfer of special property in goods for some specific purpose where the goods are returned on the completion of the purpose.
Consideration	A contract of sale is always with consideration.	The bailment of goods can be without consideration.
Returning of goods	The goods are not returned by the buyer.	The goods are returned by the bailee after the purpose is over.

13.7 CONTRACT FOR WORK AND SKILL

A contract for work and skill is a contract if it involves the exercise of skill and labour by one party on some goods or materials supplied by the other party or supplied by the party who exercises skill and labour for the price.

Following are the main features of contract for work and skill:

1. The main purpose of a contract is to exercise work and skill.
2. The supply of own goods is only subsidiary or supportive.
3. The intention of the parties is to transfer goods, only after the exercise of some skill and labour.

The Sales of Goods Act is not applicable to this category of transaction. As the Sales of Goods Act is not applicable, there is no liability of sales tax.

Example

An artist was asked to paint a portrait. The material was supplied by the party and not by the painter. It was held to be a contract for work and labour and not of sale.

13.8 TYPES OF GOODS

The goods forming the subject matter of the contract of sale may be classified as under:

13.8.1 Existing Goods

Existing goods are in actual existing at the time of the contract of sale. The existing goods are the goods which are owned and possessed by the seller at the time of sale. The existing goods may be of three types:

13.8.1.1 Specific Goods The goods which are identified and agreed upon by the parties at the time of the contract of sale are specific goods. It should be noted that the goods must be both identified and agreed upon.

13.8.1.2 Ascertained Goods Ascertained goods are the goods which are identified after the formation of the contract of sale. When the unascertained goods are identified and agreed upon by the parties, the goods are called as ascertained goods.

13.8.1.3 Unascertained Goods These are the goods which are not identified and agreed upon at the time of the contract of sale. These goods are merely described by the parties at the time of the contract of sale.

13.8.2 Future Goods

Future goods are those goods which do not exist at the time of the contract of sale. These goods are to be manufactured or acquired by the seller after the making of the contract of sale. The future goods cannot be sold but there can only be an agreement to sell.

13.8.3 Contingent Goods

It is a kind of future goods. These goods are those goods, the acquisition of which is contingent upon the happening or non-happening of an uncertain event.

Example

A agrees to sell the cargo loaded on the ship ‘Victory’, which is coming from London to Bombay. The ship may or may not arrive. So, these goods will be called as contingent goods.

13.9 PRICE OF GOODS—SECTIONS 9 AND 10

The modes of determining the price are following:

13.9.1 Method 1

The price is specified under the contract. It is the most common method of determining the price. Here, the parties decide the price in advance.

13.9.2 Method 2

The price may be determined as per the method specified in the contract. Here, the parties decide in advance, the method of determining the price.

Example

Delivery of rice on 1 December 2008 at the rate prevailing on that day.

13.9.3 Method 3

The price may be determined in accordance to the custom and the usage of the trade. This method is applicable if the parties regularly trade. Where the price is not fixed as above, the buyer shall pay the seller a reasonable price. ‘What is a reasonable price’ is a question of facts and circumstances. A reasonable price under the Sale of Goods Act means the market price.

13.9.4 Method 4

The price may be determined by the third party. If it is so, the contract shall specify the name of the third party. If the third party fails to specify, the contract is void but if the goods are delivered to the buyer and used by him, he is required to pay a reasonable price. If the third party is prevented from fixing the price, the defaulting party is liable for the damages.

13.10 CONSEQUENCES OF DESTRUCTION OF SPECIFIC GOODS—SECTIONS 7 AND 8

The consequences of the destruction of specific goods can be discussed under the following three heads:

13.10.1 If Goods Perish Before Making of Contract

The contract is void-ab-initio. due to the mistake as to the existence of the subject matter. It is to be noted that if the seller has knowledge about the destruction of goods, even then he enters into the contract of sale with the buyer then the seller is bound to compensate to the buyer.

13.10.2 Where a Part of the Goods Is Perished Before Making of Contract

If the goods were divisible then the contract can be enforced partly and if the goods were indivisible then the contract becomes void-ab-initio.

Example

A contracted to sell one wagon containing 700 bags of groundnut to B. Unknown to A, 109 bags had been stolen at the time of sale. Therefore, A made a delivery of 591 bags. Held, the sale was void.

13.10.3 If Goods Perish After the ‘Agreement to Sell’ But Before ‘Sale’

The contract is void if subsequently the goods have perished and there is no fault on the part of the buyer or the seller in perishing the goods.

Example

A horse was delivered upon trial for 8 days. However, the horse died within 8 days without the fault of buyer or seller. Held, the seller must bear the loss as the contract was void.

However, the parties to the contract may provide otherwise also.

13.11 CONDITIONS AND WARRANTIES

Generally, at the time of sale, the seller makes some representations, statements or stipulations for the praise of his goods. Some of the representations are in nature of opinion, while others are in nature of facts. The representation as to the fact which becomes a part of the contract of sale is called as stipulation. The stipulation may be a condition or warranty depending upon its importance in relation to the contract. The stipulation which is essential to the main purpose of a contract is known as condition. The breach of condition gives the aggrieved party the right to terminate the contract.

The stipulation which is collateral to the main purpose of the contract is warranty. The breach of warranty gives rise to the aggrieved party the right to claim the damages but the contract cannot be terminated. The conditions and warranties may be expressed or implied.

The express conditions and warranties are those which the parties agree expressly, i.e., orally or in writing. The implied conditions are those which are implied by the law in the absence of any agreement to the contrary. The conditions and warranties in the contract of sale constitute stipulation with the reference to goods. In the case of a conflict between the express conditions and the implied conditions, express conditions shall prevail.

The breach of condition in a contract of sale of goods gives right to cancel the contract. If the party has suffered from any loss, he can also claim compensation for the breach of condition. But the breach of warranty in a contract of sale of goods gives the right to claim the damages only. However, the liability for the implied conditions and warranties may be excluded by the parties in the following situations:

1. If an express agreement between the parties provides so.
2. If the course of dealings between the parties suggests so.
3. If there is a custom or usages of a particular trade.

According to the Section 13 of the Sale of Goods Act, 1930, a breach of condition may be treated as a breach of warranty in the following circumstances:

1. Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition.
2. Where the buyer elects to treat the breach of condition as the breach of a warranty.
3. Where the contract of sale is non-severable and the buyer has accepted the whole goods or any part thereof.
4. Where the fulfilment of any condition or warranty is excused by law by the reason of impossibility or otherwise.

13.12 IMPLIED CONDITIONS

Following are the implied conditions which are contained in the Sales of Goods Act:

13.12.1 Conditions as to Title—Section 14(a)

There is an implied condition on the part of the seller that:

1. In the case of a sale, the seller has a right to sell the goods.
2. In the agreement to sell, the seller will have a right to sell the goods at the time of passing of the ownership in goods.

If the title of a seller turns out to be defective, the buyer must return the goods to the true owner and recover the price from the seller.

13.12.2 Conditions as to Description—Section 15

Where the goods are sold by description, there is an implied condition that the goods shall correspond to the description. If later on, the buyer finds that the goods are not as per description, he may reject the goods and claim a refund of the price.

Example

A machine was sold. The buyer has not seen the machine but the seller described it as a new one. However, it was found to be a very old one. Held, the machine was not according to the description.

13.12.3 Sale by Sample—Section 17

Where the goods are sold by the sample, followings are the implied conditions:

1. The bulk shall correspond to the sample in quality.
2. The buyer shall be given a reasonable opportunity to compare the goods with the sample.
3. The goods shall be free from any defect rendering them un-merchantable. It is to be noted that this implied condition applies only in the case of the latent defects, i.e., those defects which cannot be discovered by an ordinary inspection. In fact, such defects are discovered when the goods are put to use or by examination in the laboratories. The seller is not liable for any apparent or visible defects, which can be discovered by examination.

13.12.4 Sale by Description as well as Sample—Section 15

If the sale is by sample as well as description, both the conditions shall be satisfied. The goods must correspond with the sample as well as the description.

Example

A agreed to sell to C some oil described as ‘Foreign refined oil’ and warranted only equal to sample. The goods supplied were equal to sample but contained a mixture of hemp oil. Held, C could reject the goods.

13.12.5 Conditions as to Quality and Fitness for Buyer’s Purpose—Section 16

Where the buyer, expressly or impliedly, tells the seller the particular purpose for which he needs the goods and relies on the skill or judgment of the seller, there is an implied condition that the goods shall be reasonably fit for such a purpose. It is not necessary that the purpose should be expressed in words. The purpose can also be ascertained from the nature or description of the goods.

When the article can be used only for one particular purpose, the buyer need not to inform the seller the purpose for which the goods are required.

Example

A purchased a hot water bottle from a chemist. While the bottle was being used by A’s wife, it burst and injured A’s wife. Held, the seller was liable for damages as the bottle was not fit for the purpose for which it was meant. (Priest versus Last)

13.12.5.1 Exceptions to the Implied Condition as to Quality or Fitness ‘The conditions as to the quality or fitness’ will not apply. If the buyer is suffering from an abnormality, which renders the goods unsuitable for a particular purpose and the buyer does not inform the seller about that abnormality.

Example

A purchased a coat. He had abnormally sensitive skin. By wearing the coat, he got a skin complaint. Held, there was no breach of condition as he had not disclosed the abnormality of his skin.

Where the goods can be used for a number of purposes, the buyer should inform the particular purpose for which such goods were required. If he does not disclose, there is no such condition of the quality or fitness.

13.12.6 Conditions as to Merchantability—Section 16

There is an implied condition that the goods shall be of merchantable quality, where the goods are bought by description from a seller who deals in the goods of that description.

‘Merchantability’ means that there is no defect in the goods, which renders them unfit for sale. Thus, a watch that will not keep time and a pen that will not write cannot be regarded as merchantable. In a contract for the sale of goods, the condition as to merchantability applies where the goods are bought by description or where the goods are sold under the trade mark.

Example

A radio set was sold to a layman. The set was defective. It did not work in spite of repairs. Held, the buyer could return the set and claim refund.

13.12.7 Condition as to Wholesomeness

In the case of eatables and food-stuff, there is an implied condition that the goods shall be wholesome, i.e., free from any defect which renders them unfit for human consumption. The implied condition as to the wholesomeness of the goods is applicable for every type of goods in the nature of food.

Example

A purchased milk from B, a milk dealer. The milk contained typhoid germs. A’s wife on taking the milk got infected and died. Held, A was entitled to get damages. (Frost vs Aylesbury Dairy Co. Ltd.)

13.13 IMPLIED WARRANTIES

Following are the implied warranties which are contained in the Sales of Goods Act:

13.13.1 Warranty as to Quiet Possession—Section 14

In the absence to any contract showing a contrary intention, there is an implied warranty that the buyer shall have and enjoy the quiet possession of the goods. If the buyer is disturbed in the enjoyment of the goods, he can claim the damages from the seller.

13.13.2 Warranty Against Encumbrances—Section 14

Unless the circumstances of the case are such as to show a contrary intention, there is an implied warranty that the goods shall be free from any charge or encumbrance in favour of any party not declared to the buyer before or at the time contract is made. However, there will not be any such warranty if the charge is declared to the buyer at the time of sale.

13.13.3 Warranty as to Quality and Fitness by Usage of Trade—Section 16

An implied warranty, as to the quality or fitness for a particular purpose, may be annexed by the usage of trade.

13.13.4 Warranty to Disclose the Dangerous Nature of Goods

In case of the sale of dangerous goods, the seller is under an obligation to warn the buyer about the probable danger. A failure to do so, will make the seller liable to pay the damages.

Example

A sold a tin of a disinfectant to B, knowing that it was likely to be dangerous to B if opened without special care. B opened the tin, whereupon the disinfectant powder went into her eyes causing an injury. Held, A was liable in damages to B as he failed to warn B of the probable danger.

13.13.5 Circumstances When a Condition Can Be Treated as Warranty

Section 13 of the act provides for the situations in which the condition can be treated as a warranty. These are:

1. If the buyer waives the condition.
2. If the buyer elects to treat the breach of condition as a breach of warranty.
3. If the condition becomes impossible or if the performance of the condition is otherwise excused.

13.14 DISTINGUISH BETWEEN A CONDITION AND A WARRANTY

Matter	Condition	Warranty
Stipulation	The condition is a stipulation essential to the main purpose of the contract.	The warranty is collateral (subsidiary) to the main purpose of the contract.
If breach?	The buyer has the right to cancel a contract on the breach of conditions.	The buyer has no right to cancel the contract on the breach of warranty. The buyer can claim the damages.
Treatment	The breach of condition may be treated as the breach of warranty.	The breach of warranty cannot be treated as the breach of condition.

13.15 DOCTRINE OF CAVEAT EMPTOR

‘Caveat Emptor’ is a Latin word. It means ‘let the buyer beware.’ It is the buyer’s duty to select the goods of his requirement and the seller is not bound to supply the goods which shall be fit for any particular purpose of the buyer. It suggests that the buyer, while purchasing the goods, must act with a ‘third eye and ear,’ i.e.:

1. He should be careful to see that the goods purchased will serve his purpose well.
2. If the buyer is not careful and he finds later on that the goods do not serve his purpose, he cannot hold the seller liable for it.
3. The seller is under no obligation to tell the defects of his articles.

If the buyer selects the goods as per his requirement and the goods are not satisfying his requirement, he cannot claim anything against the seller. However, in the following exceptions, the Doctrine of caveat emptor is not applicable:

1. Where the implied conditions as to the quality or fitness for the buyer’s purpose is applicable. It means when the buyer has specified his purpose and relied on the skill of the seller, the doctrine of caveat emptor is not applicable.
2. When the goods are sold by description, it should be of merchantable quality. In such case, the doctrine of caveat emptor is not applicable.
3. In case of edible items, the implied condition of wholesomeness is applicable and the goods should be of merchantable quality. If the goods are not fit for human consumption then the buyer is not liable but the seller will be liable.
4. Custom may provide that a particular defect will amount to unfitness and the buyer can reject the goods. Here the doctrine of caveat emptor is not applicable. But the custom must be reasonable.
5. When the consent of the buyer is obtained by fraud, the provision of the doctrine of caveat emptor is not applicable.

13.16 TRANSFER OF OWNERSHIP OF SPECIFIC GOODS—SECTIONS 20–22

In case of the sale of specific goods, the rules relating to the transfer of ownership are contained in Sections 20–22 of the Sale of Goods Act which may be discussed as under:

13.16.1 Ownership is Transferred at the Time of Making Contract

The ownership is transferred immediately at the time of making the contract if all the following conditions are satisfied:

1. The contract is for the specific goods.
2. The goods are in deliverable state.
3. The goods are not required to be weight or measured for determining price.

Example

A sold to B, 100 bales of cotton lying in his godown. Before the bales could be identified and separated, all the bales were destroyed in fire. Here, the seller is liable for damage because the ownership is not transferred.

13.16.2 Ownership Is Transferred When Goods Are Put in Deliverable State

If the goods are not ready in the deliverable state at the time of making the contract of sale, the ownership of goods is transferred after the formation of the contract of sale when the following conditions are satisfied:

1. The contract is for specific goods.
2. The goods are put in deliverable state by the seller.
3. The fact that the goods are put into a deliverable state, has come to the knowledge of the buyer.

Example

A certain quantity of oil was purchased by A. The oil was to be filled in tins. B filled up some of the tins and informed A to take the delivery. In the meantime, a fire destroyed the entire quantity of oil. Held, A will bear the loss of the oil which was filled in the tins and the seller must bear the loss of the balance.

13.16.3 Ownership Is Transferred When Goods in Deliverable State Put to Weighed or Measured to Ascertained Price

If the goods are not weighed or measured at the time of making a contract of sale, the ownership of the goods is transferred after the formation of a contract of sale when the following conditions are satisfied:

1. The contract is for the specific goods.
2. At the time of formation, the price is not determined. It is determined later by the weight or measurement.
3. The goods are put in deliverable state by the seller.
4. The fact that goods have been weighed or measured in order to determine the price has come to the knowledge of the buyer.

Example

A sold 10 kg of wheat. The wheat was to be weighed. Before the wheat was weighed, it was carried away by the flood. Held, the ownership of the wheat was left with the seller and it did not pass to the buyer.

13.17 TRANSFER OF OWNERSHIP IN THE CASE OF UNASCERTAINED GOODS—SECTIONS 18 AND 23

In the case of the unascertained goods, when both the parties came to know which particular goods shall be delivered, the ownership is transferred. Following conditions must be satisfied to transfer the ownership:

1. Ascertainment is the first step in the transfer of ownership. It means the process of identification and setting aside of the goods from a huge mass of goods.
2. Generally, it is made by the seller (unilateral act).
3. The contract to sell unascertained goods is not a complete sell. It is the agreement to sell.

Example

20 bags of sugar out of a bulk were agreed to be sold. 4 bags of sugar were filled up and taken away by the buyer. Subsequently, the seller filled up 16 bags and informed the buyer. The buyer replied that he will take the delivery as soon as possible. However, before the buyer could take their delivery, the goods were lost. Held, the buyer was responsible as the ownership had passed to the buyer.

13.18 TRANSFER OF OWNERSHIP IN CASE OF GOODS SALE ON APPROVAL OR ON SALE OR RETURN BASIS—SECTION 24

The term ‘sale on approval’ basis may be defined as the sale in which the buyer may return the goods within a reasonable time. This is also known as ‘sale on return’ basis. It means the buyer has the option either to return or retain the goods. Here, the property in goods does not pass from the seller to the buyer:

Case	When Ownership Transferred
When the buyer gives his approval or acceptance.	The approval or acceptance is communicated to the seller.
When the buyer does some act adopting the transaction.	When the act of adoption is done.
When the buyer fails to return the goods. (a) If the time fixed for the return of goods. (b) If no time is fixed.	The ownership of the goods transferred on the expiry of the fixed time. The ownership of the goods transferred on the expiry of a reasonable time.

Example

A certain jewellery was delivered to a buyer on sale or return basis. The buyer pledged the jewellery. Held, the buyer had adopted the transaction and as such the property had passed and the seller could not recover the jewellery from the Pawnee.

Where the railway receipt or the bill of lading is in the name of the buyer but is sent through the bank with the instructions that the same is to be delivered against the acceptance of the bill or payment of the price, the property in the goods shall not pass until the buyer makes a payment to the bank and obtain the documents.

13.19 PASSING OF RISK

The general rule is that risk passes with the ownership. We can say that risk and ownership go together. However, express agreement between the parties may provide otherwise. It means risk and property may be separated by the term in agreement. The possession of goods is immaterial for the risk. When the delivery is delayed because of the fault of any party, he is liable for risk.

Sometimes the risk is based upon the custom or the usage of trade. Where the delivery of the goods has been delayed due to the fault of buyer/seller, the goods are at the risk of the party in fault.

13.20 RULES REGARDING DELIVERY OF GOODS—SECTIONS 32–39

The rules regarding the delivery of the goods are contained in Sections 32–39 of the sales of Goods Act which may be discussed as under:

13.20.1 Payment of Price

The general rule suggests that the delivery of the goods and the payment of the price are concurrent conditions. However, the parties may provide otherwise. It means if the contract of sale provides that the payment will be made in future or the payment will be made in instalments, it is a valid contract. The payment of price and the transfer of ownership has nothing to do with each other.

13.20.2 Buyer’s Duty to Demand Goods

It is the seller’s duty to be ready and willing to deliver the goods to the buyer. But he is not bound to deliver the goods, unless the buyer makes a demand for the delivery of the goods.

If the buyer fails to demand the delivery of goods, the seller is not liable for breach. The buyer must demand the delivery within a reasonable time. However, the contract may provide otherwise.

13.20.3 Types or Mode of Delivery

13.20.3.1 Actual Delivery It is the delivery where the goods are handed over to the buyer or his authorized agent. It means the goods are physically put in possession of the buyer.

13.20.3.2 Symbolic Delivery When the goods are not physically delivered to the buyer but some symbol of the real possession or control over the goods is handed over to the buyer. The symbolic delivery of goods is also known as attornment. The transfer of documents of title to the goods, i.e., the railway receipts, bill of lading and delivery orders are instances of symbolic delivery. Such delivery is made when the goods are bulky.

Example

Delivery of key of car.

13.20.3.3 Constructive Delivery Where the third party who is in possession of goods acknowledges to hold the goods on behalf of the buyer is known as constructive delivery.

Example

A sells 100 bags of cement lying in B’s godown. B agrees to hold the 100 bags of cement on behalf of A.

13.20.4 Place of Delivery

Unless otherwise agreed anything contrary, the seller is required to make the delivery of goods at the place shown in the table below:

Situation	Place Where Goods are to be Delivered
If the contract specified the place of delivery.	At the place specified.
Contract had not specified the place of delivery In case of sale. In case of agreement of sale.	At a place at which the goods are at the time of sale.
In respect of the existing goods. In respect of the future goods.	At a place at which the goods are at the time of agreement of sale. At a place at which the goods are manufactured or produced.

13.20.5 Time of Delivery

If the contract specified the time of delivery, the goods shall be delivered within such time. If no time is specified in the contract as to the time of the delivery of goods, it should be delivered within a reasonable time. A reasonable time is question of the fact depending upon the facts and circumstances of each particular case.

13.20.6 Expenses

All the expenses of making the delivery of goods shall be paid by the seller unless, otherwise, agreed and all the expenses of receiving the goods are paid by the buyer. However, the seller and the buyer may agree otherwise.

13.20.7 Delivery of Wrong Quantity

The delivery of wrong quantity means the seller has delivered the goods in excess or short.

If the seller has delivered excess quantity, the buyer has the following options:

1. To accept the whole of the goods delivered to him.
2. To reject the whole of the goods delivered to him.
3. To accept the contracted quantity and reject the excess.

If the seller has delivered a short quantity, the buyer has the following options:

1. To accept the goods delivered to him.
2. To reject the whole quantity delivered to him.

The right to reject the goods in excess of the contract does not apply where the variation is negligible.

Further, the right to reject the goods is not similar to the right to cancel the contract. If the buyer rejects the goods (either because they are less than or in excess of the quantity contracted for), the seller has a right to tender again the contract quantity and the buyer is bound to accept the same.

The buyer is not bound to return the rejected goods. It is sufficient if the buyer intimates the seller that he refuses to accept the goods.

13.20.8 Delivery of Mixed Quality–Quantity

The seller is bound to deliver the goods of exact quality–quantity otherwise the buyer may:

1. Reject the whole.
2. Reject the goods not complying with the quality or quantity and accept the rest.

13.20.9 Delivery by Instalment

The buyer is not bound to accept the goods delivered in instalment. The delivery by instalment is not valid except if the contract provides so or the buyer accepts the delivery in instalment.

13.20.10 Right to Examine—Section 41

In every contract for Sale of Goods, the buyer has the right to examine the goods unless, otherwise, agreed in the contract.

13.20.11 Delivery to Carrier or Wharfinger—Section 39

The delivery to the carrier or the wharfinger amounts as the delivery to the buyer if the following conditions satisfy:

1. The buyer has made a reasonable contract with the carrier.
2. The seller is required to give notice to the buyer to enable him to insure the goods.

13.20.12 Seller Duty on Valid Delivery of Goods

If the seller makes a valid delivery of the goods, the buyer has the following duties:

1. To accept the goods.
2. To pay the unpaid price.

13.20.13 Acceptance of Delivery—Section 42

The delivery of goods should be voluntary and lawful. The delivery of goods has the effect of putting the goods in the buyer’s possession. The delivery does not mean the acceptance of goods. The buyer is deemed to have accepted the goods under the following circumstances:

1. When he intimates the seller about the acceptance of goods.
2. After the receipt of goods, he does some act of affirmation.
3. When he does not inform the seller about the rejection of goods with in a reasonable time.

13.20.14 Wrongful Refusal to Take Delivery

If the buyer wrongfully refuses to take the delivery of goods, he is liable for the damages and expenses like the storage cost and the transportation cost to the seller.

13.20.15 Goods Sent by Sea Route

Where the goods are sent by the sea route, the seller shall give a notice to the buyer to insure the goods, otherwise he will be liable for a loss.

13.21 UNPAID SELLER

The seller to whom the full price of the goods sold has not been paid the price is known as an unpaid seller. A seller of goods is deemed to be unpaid in the following cases:

1. The price must be due but not paid.
2. A negotiable instrument like cheque and bill of exchange was received but the same has been dishonoured.
3. The seller who has obtained a decree for the price of the goods will also be an unpaid seller if the decree has not been satisfied.
4. When the seller has been paid a large amount but small portion of the payment remains to be paid.
5. When the price has been paid but some other expenses which were payable to the seller has not been paid.
6. The seller must have an immediate right of action for the price.

However, the seller is not an unpaid seller if the buyer has tendered the price and the seller has refused to accept it.

Example

Z sells goods worth ₹ 50,000 to B on credit of five months. After five months, B did not pay the price. Z shall be regarded as an unpaid seller.

13.22 RIGHTS OF UNPAID SELLER

An unpaid seller has the right against the goods as well as against the the buyer:

13.22.1 Rights of Unpaid Seller Against the Goods When Ownership Is Transferred

Where the ownership of the goods is transferred, the seller has the following rights available to him, based upon the circumstances which can be discussed as under:

1. The right of lien—Sections 47–49
2. The right of stoppage in transit—Sections 50–52
3. The right to the resale of goods.

13.22.2 Rights of Unpaid Seller Against the Goods When Ownership Is Not Transferred

Where the ownership is not transferred to the buyer, the seller has the right to withhold the delivery of goods. In case where the ownership is not transferred to the buyer, the seller has no other right available to him.

13.22.3 Rights of Unpaid Seller Against Buyer

An unpaid seller has the following rights available against the defaulting buyer:

1. He may sue for the price—Section 55
2. He may sue for the damages for the non-acceptance of goods—Section 56
3. He may sue for the damages for the repudiation of the contract before the due date of the delivery of goods—Section 60
4. He has the right of interest for the delayed payment—Section 61.
5. He may sue the damages for the wrongful refusal to take the delivery.

13.23 RIGHT OF LIEN

Lien means the right to retain the possession of goods until the full price is received. The right of lien can be exercised on the goods. The seller can exercise his right of lien on the following two conditions:

1. He must be in possession of the goods.
2. He is an unpaid seller.

If the buyer has paid a part of the price, he cannot compel the seller to release the goods in proportion to the price paid. If the buyer becomes insolvent, the lien can be exercised by the unpaid seller. In the following circumstances, the unpaid seller’s lien is lost:

1. When the seller waives his right of lien.
2. When the buyer disposes off the goods by sale with the consent of the seller.
3. When the goods are delivered to the buyer or his agent.
4. When the price is paid by the buyer.
5. The right of lien cannot be exercised where the right of lien has been expressly excluded.
6. When the goods are destroyed.

13.24 RIGHT OF STOPPAGE IN TRANSIT—SECTIONS 50–52

The right of stoppage in transit is an extension of the right of lien. The right of lien is a right to retain the possession, whereas the right of stoppage in transit is a right to regain the possession. The right of stoppage in transit can be exercised if the goods are in transit and the buyer has become insolvent in the meantime. The right of stoppage in transit can be exercise by the unpaid seller where he has lost his right of lien. The goods in transit can be stopped for the price. The unpaid seller has made a part delivery of the goods, he may exercise his right of stoppage in transit on the remaining part of the goods for the price.

13.24.1 Duration of Transit—Section 51

A carrier may hold the goods in three capacities:

13.24.1.1 As Seller’s Agent In this case, the seller has lien on the goods, so the question of the right of stoppage in transit does not arise.

13.24.1.2 As Buyer’s Agent In this case, the seller cannot exercise the right of stoppage in transit.

13.24.1.3 In an Independent Capacity In this case, the seller can exercise the right of stoppage in transit.

The goods are deemed to be in course of transit from the time they are delivered to a carrier for the purpose of transmission to the buyer until the buyer or his agent takes their delivery.

The goods are in transit even if the buyer asks the carrier to take them to some other destination, until they are delivered to the buyer at some other destination.

If the goods are rejected by the buyer and the goods are in the possession of the carrier, the transit is not at an end, even if the seller has also refused to take them back.

The right of stoppage of goods in transit can be exercise either:

1. By taking the actual possession of the goods.
2. By giving a notice of his claim to the carrier who holds the goods.
3. By a notice of his claim to the bailee who is in possession of the goods.

Where the unpaid seller exercises his right of stoppage in transit and regains the possession of goods his right of lien is revived.

13.25 RIGHT OF RESALE

If the ownership of the goods is transferred to the buyer but the price is not paid and the goods are in possession of the seller, he can exercise the right of resale. In case of perishable goods, the unpaid seller can resale the goods if the buyer fails to pay the price within a reasonable time. The seller is not required to give notice of the re-sale in the case of perishable goods.

In case of the non-perishable goods, the unpaid seller can resell the goods if he has exercised his right of lien or stoppage of goods in transit. In the case of non-perishable goods, the seller is required to give a notice to the buyer to pay the price within a reasonable time and the buyer fails to pay the price. The seller can exercise his right of the re-sale of the goods when he expressly reserves this right. In such case, no separate notice is given.

Following will be the effects of the resale of goods:

Rights	In Case of Resale After Notice	In Case of Resale Without Notice
The unpaid seller’s right to recover the loss on sale.	Yes, the loss can be recovered.	No, the-loss cannot be recovered.
The original buyer’s right to recover the profit on goods.	No, the profit cannot be recovered.	The profit can be recovered.
New buyer’s right to acquire good title.	Acquire title.	Acquire title.

13.26 RIGHT TO WITHHOLD DELIVERY OF GOODS

The right to withhold the delivery of goods means the seller refuses to deliver the goods to the buyer. The following conditions must be satisfied to exercise the right to withhold the delivery of goods:

1. The seller is an unpaid seller.
2. The ownership of goods has not been passed.

The right to withhold the delivery of goods is in addition to the other remedies available to the seller.

13.27 DELIVERY TO CARRIER

A carrier means a transporter or a bailee to whom the goods are delivered by the seller for transportation to the buyer. When the goods are delivered to a carrier, it is deemed delivery of goods to the buyer if the following conditions are satisfied:

1. The seller delivers exactly the same goods as per the contract.
2. The buyer has informed the carrier name, address and the goods required to be delivered.
3. The seller delivers the goods for the purpose of delivery.

13.28 BUYER’S RIGHT AGAINST THE SELLER OR REMEDIES AGAINST SELLER—SECTIONS 55–61

The buyer has the following remedies against the seller:

13.28.1 Suit for Damage for Non-delivery

The buyer is ready and willing to take the delivery of goods but the seller wrongfully neglects or refuses the delivery of goods, the buyer may sue the seller for the damage for non-delivery.

13.28.2 Suit for Specific Performance

Where the seller’s wrongful refusal to deliver specific or ascertained goods is seen, the court may direct a specific performance order.

13.28.3 Suit for Breach of Warranty

If there is breach of warranty, the buyer may claim the damages from the seller. The buyer may deduct the amount of damage from the price payable if the price is not paid. The buyer may recover the damages if the price is paid.

13.28.4 Right to Repudiate the Contract

If the seller declares his intention of the non-delivery of goods, the buyer may repudiate the contract and immediately sue for damages.

13.28.5 Suit for Interest

In the absence of any contract to the contrary, no interest shall be payable by the buyer on the delay payment. If there is no such agreement the seller may give notice to the buyer of his intention to charge interest on the delayed payment.

13.29 SALE BY NON-OWNERS OR TRANSFER OF TITLE BY NON-OWNERS—SECTIONS 27–30

The general rule is expressed by the maxim ‘Namo dat quod non habet’ which means no one can give what he does not himself possess. If the seller’s title is defective then the buyer’s title will be defective. Alternatively, we can say that the seller cannot give a better title to the buyer than he himself has.

Following are exception to the above general rule:

13.29.1 Sale by Mercantile Agent

The agent of the seller can transfer the title if the following conditions are satisfied:

1. The agent must be in possession of the goods or document of title.
2. The agent has sold the goods in ordinary course of business.
3. The buyer has acted in good faith.
4. The buyer has no knowledge that the seller had no authority to sell.

Example

A entrusted his car to a mercantile agent to receive the offers and not to sell. A also delivered signed documents to the agent. On the basis of these documents, the agent pretended to the buyer that he had the authority to sell the car and thus, the car was sold. Held, the owner was stopped from denying the buyer’s title.

13.29.2 Sale by One of the Joint Owners—Section 28

One of the joint owners can sell the goods if the following conditions are satisfied:

1. The goods are in sole possession of one of the joint owners.
2. The buyer has acted in good faith.
3. The buyer has no knowledge that the seller had no authority to sell.

Example

A and B jointly purchased a car. The car was in the possession of A with the consent of B. Later on, A sold the car to an innocent purchaser. The purchaser will get a good title.

13.29.3 Sale by Person in Possession Under Voidable Contract

1. The seller must be in possession of the goods under the contract voidable.
2. The goods must have been sold before the contract is rescinded.
3. The buyer has acted in good faith.
4. The buyer has no knowledge that the seller had no authority to sell.

Example

A purchased a watch from B under fraud. A sold the watch to C who bought it in good faith. C gets good title.

13.29.4 Sale by Seller in Possession After Sale—Section 30

The seller may sell the goods in possession after sale if the following conditions are satisfied:

1. The ownership of goods has been passed to the buyer.
2. The seller continues to be in possession of the goods even after sale.
3. The seller resells the goods to a new buyer.
4. The new buyer buys without any notice to prior sell.

Example

A sells certain goods to B and promises to deliver the goods the next day. Before the delivery, A sells and delivers the goods to C who buys them in good faith and without notice of the prior sale to B. C gets a good title to the goods, notwithstanding that the property had, before he purchased, passed to B.

13.29.5 Sale by Unpaid Seller

This is the sale by the unpaid seller after the exercise of his right of lien or the right of stoppage of goods in transit.

13.29.6 Sale by Liquidator

If the owner of the goods has declared insolvent and his goods are sold by the official receiver or assignee or liquidator. The liquidator has the authority to sell the goods as per the court order.

13.29.7 Sale by Finder of Goods

If the owner cannot be found or found but refuses to pay the lawful charges to the finder.

The finder of goods can sell the goods when the goods are perishable in nature or in danger without finding the true owner of goods to save the goods from loss.

The finder of the goods can sell the goods if the lawful charges of the finder amount as two-third of its original value.

13.29.8 Sale by Pawnee or Pledgee

If there is a default on the part of payment of price or performance within time after serving the notice of a reasonable time, the pawnee or pledge can sell the goods in public auction to recover his due.

13.30 AUCTION SALE—SECTION 64

It means public sale. The seller invites the interested parties by advertisement to offer the price (i.e., bid). The seller may hire the service of the auctioneer. An auctioneer is an agent of the seller. The advertisement of the auction sale is not an offer but an invitation to make an offer and therefore if an auction sale is not held on the appointed day, the bidder cannot sue the auctioneer.

Every bid amounts as an offer and the acceptance is given by the auctioneer by some usual mode of acceptance e.g., fall of hammer, going-going-gone or one-two-three.

The auction sale starts with the placing of bids. The auctioneer accepts the highest bids but he may accept the lower bid without giving reason. When the bid is accepted, a valid contract is formed.

A bid once made can be withdrawn before the fall of hammer even if expressly prohibit. The seller can bid at an auction sale if the bidders are informed of the fact (Pretended bidding). If the seller makes use of the pretended bidding to raise the price, the sale is voidable at the option of the buyer. The bid is said to be pretended when it is made by the seller or someone on his behalf. Only one person can be appointed for bidding.

They auctioneer may set a reserve price or upset price. The bid lower than which is invalid.

In the case of Knockout agreement, the buyers join their hands to eliminate competition among themselves at an auction sale. They agree that they will not raise the bid against each other and only one of them will bid at the auction. When the goods have been purchased, they will share the profit. Prima facie, a knockout agreement is not illegal. However, if the intention of the parties to the agreement is to defraud a third party, this will be illegal.

Damping is an act by which an intending bidder is discouraged from bidding. Damping is an illegal. It includes:

1. Pointing out defects in the goods.
2. Misleading the purchaser or doing any other act so that he may not participate in the auction.

The damping empowers the auctioneer to withdraw the property from the auction.

13.31 DELIVERY OF GOODS IN CONTRACT BY SEAR ROUTE

It includes the following three categories of contracts:

13.31.1 CIF Contract

It means ‘cost, insurance and freight’. Here the price of goods includes the cost of goods, insurance and freight expenses. In the CIF contract, the buyer pays the insurance and freight expenses.

The essential of the CIF contract is that the seller shall deliver the shipping documents to the buyer usually through the bank. If the seller fails to deliver the documents within a reasonable time, he is liable for breach of contract.

The ownership of goods is transferred to the buyer when he pays the price of the goods while receiving the shipping documents. If the buyer refuses to pay the price, the seller can claim the damages for the breach of contract.

13.31.2 F.O.B. Contract

It means free on board. Here, the seller is required to put the goods on the board of ship at his expenses. The buyer is liable for all the expenses and risk, once goods are loaded on the ship. The ownership of goods is transferred to the buyer as soon as the goods are loaded to the ship.

13.31.3 Ex-ship Contract

It means the contract in which the seller has to deliver the goods to the buyer at the port of destination. All the freight charges and risks during the voyage for the goods remain with the seller. The ownership of the goods is transferred to the buyer when the goods are actually delivered at the port of destination.

LIST OF LANDMARK JUDGEMENTS

1. Commissioner of Sales Tax vs M. P. State Electricity Board (1970)

   The electricity is goods since it is capable of being transferred, transmitted, delivered, stored and possessed.

2. Jabalpur Cable Network (P) Ltd vs ESPN Software Ind (P) Ltd (1999)

   The electricity signals like cable tv signals is goods.

3. SBI vs Neela Naik (2000)

   The bank fixed deposit receipt is goods.

4. H. Anurag vs Govt. of Tamil Nadu (1986)

   The lottery Tickets are goods and not actionable claims.

5. Grant vs Australian Knitting Mills Ltd (1936)

   In case of undergarments, if they are purchased, there is an implied condition that they shall not contain any chemicals which would cause harm to skin.

6. State of Gujrat vs Raman Lal and Co.

   The distribution of goods among the partners on account of dissolution of the firm does not amount to the sale of goods because they cannot be both sellers and buyers.

7. K. J. Abraham vs Asst. STO (1960)

   Animals and birds in captivity are goods.

8. R. D. Goyal vs Reliance Industries Ltd (2003)

   After the allotment shares are goods.

9. Damodar Valley Corp. vs State of Bihar (1961)

   In the case of hire-purchase, ‘sale’ takes place only when the purchaser exercises the option to purchase after paying all the agreed amount. Till then it is bailment.

10. Belsize Motor Supply Co. vs Cox (1914)

    If a person had obtained goods on hire-purchase or lease, he has the option to buy the goods. In such a case, he has neither bought nor agreed to buy goods. Hence, he has no right to pledge or otherwise dispose of the goods. He cannot pass a better title to the third person and the owner can claim back the possession of goods.

11. Consolidated Coffee Ltd vs Coffee Board (1980)

    The Property in auction sale passes to the purchaser on the acceptance of bid.

12. Zilla Parishad vs Udi Veer Singh (1989)

    If the bidder withdraws the offer before acceptance, the security deposit paid by him cannot be forfeited.

13. Suresh Kumar Rajendra Kumar vs Assan Koya (1990)

    The goods cannot be rejected by the buyer on account of the minor difference in the quantity.

14. Escorts JCB Ltd vs CCE (2000)

    The delivery of goods to the carrier is prima facie delivery of goods to the buyer.

15. Venkatu Lallaya vs Ramaswami and Co. (1964)

    The contract of sale may provide for the manner in which the price is to be fixed.

16. Geddling vs Marsh (1920)

    The implied condition as to fitness for the purpose goods also applies to the containers in which the goods are packed.

17. Philip Head and Sons Ltd vs Showfronts Ltd (1970)

    When there is a contract for the sale of specific goods not in deliverable state, the property does not pass until it is put in a deliverable state and the buyer has notice of it.

18. Lacis vs Cashmarts (1964)

    In a self service supermarket where the goods are picked up by the customers from the shelves and their prices are paid at the counter, no contract of sale is made until the price is actually paid and the property passes after the price is paid at the counter.

TEST YOUR KNOWLEDGE

1. Define the goods. Explain it with suitable examples.

   (Ref. Para-13.2)

2. Which documents are included under the document of title?

   (Ref. Para-13.2)

3. Explain the concept of property with reference to goods.

   (Ref. Para-13.2)

4. State briefly the essential elements of a contract of sale under the Sale of Goods Act, 1930.

   (Ref. Para-13.3)

5. How is a contract of sale made?

   (Ref. Para-13.3)

6. Distinguish between a sale and an agreement to sell.

   (Ref. Para-13.4)

7. In what ways does a sale differ from hire-purchase?

   (Ref. Para-13.5)

8. Distinguish between a sale and a bailment.

   (Ref. Para-13.6)

9. The contract for work and skill are not included in the Sales of Goods Act. Explain.

   (Ref. Para-13.7)

10. What are the main features of the contract for work and skill?

    (Ref. Para-13.7)

11. Define goods. Explain in brief the meaning of the existing goods and future goods.

    (Ref. Para-13.8)

12. How is the price in the contract of sale of goods ascertained?

    (Ref. Para-13.9)

13. What do you understand by Goods? What are the rules in case the goods perish before and after making contract of sale of goods?

    (Ref. Para-13.2,13.10)

14. What do you understand by the conditions and warranties of a contract of the sale of goods?

    (Ref. Para-13.11)

15. What are the circumstances when a condition can be treated as warranty?

    (Ref. Para-13.11)

16. What are the implied warranties and conditions in a contract of sale of goods?

    (Ref. Para-13.12,13.13)

17. What are the implied warranties in a contract of sale under the Sales of Goods Act, 1930?

    (Ref. Para-13.13)

18. Point out the difference between the conditions and warranties under the Sales of Goods Act, 1930.

    (Ref. Para-13.14)

19. What do you understand by ‘caveat emptor’ under the Sale of Goods Act, 1930? What are the exceptions to this rule?

    (Ref. Para-13.15)

20. In the contract of sale, when does the property in goods passes on to the buyer?

    (Ref. Para-13.16, 13.17,13.18)

21. When is the ownership transferred in the case of goods sent on approval?

    (Ref. Para-13.18)

22. How does the risk pass in the contract for Sale of Goods Act?

    (Ref. Para-13.19)

23. Risk always passes with ownership. Comment.

    (Ref. Para-13.19)

24. What are the rules relating to the delivery of the goods in a contract of sale of goods?

    (Ref. Para-13.20)

25. Explain the modes of the delivery of goods.

    (Ref. Para-13.20)

26. The delivery of goods does not mean an acceptance of goods. Comment.

    (Ref. Para-13.20)

27. Who is an unpaid seller? What are his rights against the goods?

    (Ref. Para-13.21)

28. What types of suits can be preferred by the seller against the buyer in case of a breach of contract of sale?

    (Ref. Para-13.22)

29. Write a short note on an unpaid seller’s lien.

    (Ref. Para-13.23)

30. Write a short note on the unpaid seller’s right of the stoppage of goods in transit.

    (Ref. Para-13.24)

31. Write a short note on the right of the unpaid seller to re-sell the goods.

    (Ref. Para-13.25)

32. What do you understand by the right to withhold the delivery of goods?

    (Ref. Para-13.26)

33. Write a short note on the delivery to carrier.

    (Ref. Para-13.27)

34. What type of remedies are available to the buyer against the seller?

    (Ref. Para-13.28)

35. ‘Nemo dat quod non habet’ explain. What are its exceptions?

    (Ref. Para-13.29)

36. What are the provisions relating to the auction sale?

    (Ref. Para-13.30)

37. Write a short note on the CIF, FOB and Ex-ship contract.

    (Ref. Para-13.31)

MULTIPLE-CHOICE QUESTIONS

1. The Sale of Goods Act, 1930 deals with
   1. bailment.
   2. gift.
   3. hire-purchase sales.
   4. sale of goods in general.
2. The Sale of Goods Acts applies to contracts of
   1. sale of goods.
   2. sale of services.
   3. pledge of goods.
   4. hire-purchase.
3. A contract of sale may be
   1. oral.
   2. written.
   3. always expressed.
   4. either (i) or (ii).
4. A agrees to deliver 1 kg of wheat to B in exchange of 2 kg of rice. It is a/an
   1. contract of sale.
   2. agreement to sell.
   3. sale on approval.
   4. barter.
5. A agrees to deliver 1 kg of wheat to B in exchange of 500 gm of rice and 500 gm of sugar. It is a/an
   1. contract of sale.
   2. agreement to sell.
   3. sale on approval.
   4. barter.
6. A agrees to deliver 1 kg of wheat to B in exchange of 500 gm of rice and ₹ 50. It is
   1. contract of sale.
   2. hire purchase.
   3. sale on approval.
   4. barter.
7. Which of the following are not included in the term ‘Goods’ under the Sale of Goods Act.
   1. Stock and shares.
   2. Actionable claims.
   3. Growing crops, grass etc.
   4. Personal use property.
8. According to Sale of Goods Act, the term ‘Goods’ includes
   1. goodwill.
   2. patent.
   3. old coins and notes.
   4. all of the above.
9. According to Sale of Goods Act, the term ‘Goods’ includes
   1. copy right.
   2. information.
   3. autograph.
   4. all of the above.
10. The word ‘Property’ in the Sale of Goods Act, 1930 means
    1. ownership.
    2. transferor.
    3. purchaser.
    4. all of the above.
11. Under the Sale of Goods Act, ‘Existing Goods’ means
    1. goods which are already manufactured before the contract made.
    2. goods which are to be manufactured after making the Contract of Sale.
    3. both (i) and (ii).
    4. goods which come into being, upon the happening of a contingency.
12. The term ‘Contingent Goods’ means
    1. goods, the acquisition of which depends upon a contingency.
    2. goods which are not capable of identification.
    3. goods which may not be sold.
    4. goods the acquisition of which does not depend upon any contigency.
13. The goods which are to be produced by the seller after the contract of sale is made are known as
    1. contingent goods.
    2. unascertained goods.
    3. future goods.
    4. none of the above.
14. The price of goods may be fixed
    1. under the contract of sale.
    2. by manner provided in the contract of sale.
    3. by course of dealing between the parties.
    4. all of the above.
15. Gift of goods is not a sale as the following essential elements of sale is missing
    1. capacity of party.
    2. lawful consideration.
    3. price.
    4. all of the above.
16. Which of the following is correct?
    1. In a hire-purchase agreement, the buyer may either buy or return the goods.
    2. Hire-purchase agreement must be written.
    3. Hire-purchase agreement is governed by the Hire-purchase Act.
    4. all of the above.
17. A agreed to sell old rare coins to B at ₹ 300 per coin. It is a
    1. void contract.
    2. valid contract.
    3. voidable contract.
    4. none of the above.
18. In a contract of sale where goods lie with the seller, the risk of loss of goods remains with the
    1. insurance company.
    2. buyer only.
    3. seller only.
    4. buyer and seller equally.
19. A mechanic while repairing car supply of the spare parts required for such repairs. It is
    1. a contract of sale.
    2. an agreement to sell.
    3. a contract for work and skill.
    4. hire-purchase.
20. Which of the following statements is incorrect?
    1. A contract of sale may be implied.
    2. A contract of sale must be made in a particular mode, as prescribed by any law.
    3. A contract of sale cannot be partly in writing and orally.
    4. A contract of sale may be made in writing or orally.
21. If a price is not determined by the parties in a contract of sale, the buyer is bound to pay
    1. the price demanded by the seller.
    2. a reasonable price.
    3. the price which the buyer thinks is reasonable.
    4. either (i) or (ii) or (iii) whichever is less.
22. Condition in a contract of sale, constitute stipulation with reference to
    1. time.
    2. price.
    3. goods.
    4. delivery.
23. Warranty in a contract of sale, constitute stipulation with reference to
    1. time.
    2. price.
    3. goods.
    4. delivery.
24. The breach of a ‘Condition’ in a contract of sale of goods gives the right to
    1. cancel the contract.
    2. claim for damages.
    3. either (i) or (ii).
    4. both (i) and (ii).
25. Breach of a ‘Warranty’ in a contract of sale of goods, gives the right to
    1. reject the goods.
    2. claim for damages.
    3. repudiate the contract.
    4. all of the above.
26. When the buyer’s right of quiet possession of goods is affected by the seller’s fault, the buyer can
    1. reject the goods.
    2. claim for damages.
    3. repudiate the contract.
    4. all of the above.
27. There is an __________ that the goods shall be free of any charge in favour of any third party.
    1. implied warranty
    2. implied condition
    3. express condition
    4. express warranty
28. A agreed to sell 100 per cent cotton shirt by sample. The shirt delivered was equal to sample but not of cotton. What are the Buyer’s rights?
    1. Reject the goods.
    2. Claim for damages.
    3. Reclaim the price paid.
    4. All of the above.
29. In case of conflict between the express conditions and the implied conditions, which one of them shall prevail
    1. implied conditions.
    2. express conditions.
    3. neither of them.
    4. new terms imposed by court.
30. A purchased a hot water bottle from a chemist. The bottle burst and injured his wife. The chemist is liable on account of
    1. breach of express condition as to quality.
    2. breach of implied condition as to quality.
    3. personal injury caused to the buyer’s wife.
    4. breach of implied warranty as to quality.
31. In a contract of sale of goods, the implied condition as to wholesomeness applied to ….
    1. drug.
    2. food.
    3. clothes.
    4. jewelry.
32. Which of the following is correct?
    1. Disclosure of dangerous nature of goods is an implied condition in a contract of sale.
    2. Generally, there is no implied condition as to quality or fitness of goods for any particular purpose of the buyer.
    3. A warranty may be treated as condition under certain cases.
    4. All of the above.
33. ‘Caveat Emptor’ means
    1. buyer must take care.
    2. buyer must take a chance.
    3. seller must take care.
    4. seller must take a chance.
34. The process of identifying the goods and setting apart is called
    1. identification.
    2. procurement.
    3. ascertainment.
    4. allocation.
35. For the passing of property in goods, the goods should be in a
    1. deliverable state.
    2. non-deliverable state.
    3. consumable state.
    4. packed.
36. Where the specific goods are in a deliverable state but the seller has to do some act to ascertain the price, the property in the goods is transferred to the buyer when the
    1. seller does that act.
    2. buyer comes to know about the same.
    3. both (i) and (ii).
    4. buyer takes the delivery of goods.
37. In case of sale on approval basis, property passes to the buyer when
    1. buyer accepts the goods.
    2. buyer does any act adopting the transaction.
    3. buyer retains the goods beyond the stipulated time or reasonable time, without giving notice of rejection.
    4. all of the above.
38. Which of the following statements is incorrect in relation to ‘sale on approval’?
    1. The seller cannot ask for the return of the goods sold.
    2. The seller cannot recover the price, if the goods are not returned within a reasonable time.
    3. The seller can recover the price, if the goods are not returned without a reasonable time.
    4. The ownership of goods is transferred to the buyer, if he fails to return the goods within fixed time.
39. In case of sale on ‘sale or return’ basis, the property passes to the buyer when
    1. buyer retains the goods for more than the contract-stipulated time.
    2. buyer rejects the goods with in a reasonable time.
    3. neither (i) nor (ii).
    4. both (i) and (ii).
40. Risk passes with
    1. ownership.
    2. completed agreement.
    3. verification of goods.
    4. payment of price.
41. Where delivery has been delayed through the fault of either the buyer or the seller _______ is liable for any loss to goods.
    1. buyer.
    2. seller.
    3. party at fault.
    4. party not in fault.
42. Which of the following is incorrect?
    1. Generally, the property in the ascertained goods is transferred to the buyer at such time as the parties intend it to be transferred.
    2. Contingent goods are type of future goods.
    3. All of the above.
    4. None of the above.
43. Where the contract is for the sale of divisible lot of specific goods and only a part of the goods is destroyed, the contract ……
    1. becomes void.
    2. is valid for remaining part.
    3. becomes illegal.
    4. becomes voidable.
44. A finder of goods has the power to sell the goods when
    1. the owner cannot be found out.
    2. the owner can be found out.
    3. the finder donot want to find the owner.
    4. either (ii) or (iii).
45. A finder of goods has the power to sell the goods when lawful charges in preserving the goods amount to at least...... of the value of the goods found.
    1. one-half.
    2. one-third.
    3. two-third.
    4. three-fourth.
46. A general rule says that the delivery and the payment of price are............. conditions.
    1. subsequent.
    2. consequent.
    3. concurrent.
    4. relevant.
47. When the goods are physically handed over to the the buyer, it is a case of
    1. actual delivery.
    2. constructive delivery.
    3. symbolical delivery.
    4. general delivery.
48. When the seller causes a change in the possession of goods without any actual change in their actual and visible custody, it is a case of
    1. actual delivery.
    2. constructive delivery.
    3. symbolical delivery.
    4. forward delivery.
49. Delivery of the godown keys where the goods are lying to the buyer is an example of
    1. actual delivery.
    2. constructive delivery.
    3. symbolical delivery.
    4. forward delivery.
50. Transfer of documents of title to the goods sold to the buyer amounts to
    1. actual delivery.
    2. symbolic delivery.
    3. constructive delivery.
    4. none of the above.
51. The goods sold to the buyer should be delivered at
    1. the specified place.
    2. the place of seller’s choice.
    3. the place of buyer’s choice.
    4. either (ii) or (iii).
52. In case of delivery of wrong quantity of goods, the buyer has a right to
    1. accept the whole.
    2. reject the whole.
    3. accept the quantity contracted for and reject the rest.
    4. either (i) or (ii) or (iii).
53. In which of the following situations, the buyer is not deemed to have accepted the goods?
    1. When he intimates to the seller that he has accepted them.
    2. When the goods are delivered to him, he does some action which is inconsistent with the ownership of the seller.
    3. When he does not return the goods after rejecting them.
    4. None of the above.
54. Buyer is not bound to return rejected goods. It is sufficient if the buyer
    1. returns the goods to the carrier.
    2. returns the goods to the seller’s agent.
    3. intimates the Seller that he refuses to accept the goods.
    4. dishonours the Bill of Exchange drawn.
55. A sold the goods to B for ₹ 20,000. B paid ₹ 5000 A is
    1. an unpaid debtor.
    2. an unpaid seller.
    3. not a defaulter.
    4. none of the above.
56. Unpaid seller has right of
    1. lien.
    2. stoppage of goods in transit.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
57. Unpaid seller has right against buyer when
    1. ownership of goods is transferred to buyer.
    2. ownership of goods is not transferred to buyer.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
58. Unpaid seller can exercise his right of lien
    1. even when property in goods has passed to the buyer.
    2. when general property in goods has passed to the buyer.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
59. In which of the following situations, the right of lien is lost?
    1. Where the goods have been delivered to the buyer.
    2. Where the goods have been delivered to the buyer’s agent.
    3. Neither (i) nor (ii).
    4. Either (i) or (ii).
60. The unpaid seller does not lose his right of lien
    1. when he delivers the goods to a carrier for the purpose of transmission to the buyer without reserving the right of disposal.
    2. when the buyer obtains possession of the goods.
    3. when the teller waives the right of lien.
    4. when the seller obtains a decree for the price of the goods.
61. The Right of Stoppage in transit can be exercised by the unpaid seller where he
    1. has lost his right of lien.
    2. still enjoys his right of lien.
    3. both (i) and (ii).
    4. neither (i) nor (ii).
62. The Right of Stoppage in transit can be exercised by the unpaid seller where the buyer
    1. is solvent.
    2. becomes insolvent.
    3. has become insane.
    4. neither (i) nor (ii).
63. The unpaid seller’s right of lien is to
    1. re-organize possession of goods.
    2. re-sell the goods.
    3. regain possession of goods.
    4. retain possession of goods.
64. The unpaid seller’s right of stoppage in transit is to
    1. re-organize the possession of goods.
    2. re-sell the goods lying with the carrier.
    3. regain the possession of goods.
    4. retain the possession of goods.
65. Which of the following rights are available to an unpaid seller against the buyer?
    1. Suit for price.
    2. Suit for interest.
    3. Suit for repudiation.
    4. All of the above.
66. If no notice is given to original buyer of the intention to re-sell, the unpaid seller
    1. cannot claim any damages.
    2. has to pay to the original buyer, the profits, if any, on re-sale.
    3. either (i) or (ii).
    4. both (i) and (ii).
67. Where the buyer wrongfully refuses to accept and pay for goods, the seller may sue him for
    1. payment of price of goods.
    2. damages for non-acceptance of goods.
    3. payment of other expenses.
    4. all of the above.
68. Which of the following is correct?
    1. Seller may file suit for specific performance.
    2. Seller may claim damages where buyer refuse to take delivery of the goods.
    3. Both (i) and (ii).
    4. None of the above.
69. Auction sale is also known as
    1. public sale.
    2. private sale.
    3. cash sale.
    4. none of the above.
70. In the case of sale by auction, the seller of goods has a right to bid at the auction
    1. with the permission of the auctioneer.
    2. only when the right to bid has been expressly reserved.
    3. even when the right to bid has been impliedly reserved.
    4. with the permission of the bidder.
71. In the case of sale by auction, contract is made
    1. by strike of hammer third time.
    2. on payment.
    3. by bid.
    4. by delivery of goods.
72. In the case of an auction sale, contract is entered into by which of the following method?
    1. On strike of hammer third time.
    2. By saying 1-2-3.
    3. By saying going-going and gone.
    4. All of the above.
73. In a contract through the sea route, the contract for the sale of goods at the price which include the cost of goods, insurance and freight charges, the contract is known as
    1. C.I.F. contract.
    2. F.O.B contract.
    3. insurance obligatory contract.
    4. ex-ship contract.
74. In which of the following contracts, the seller is under an obligation is insure the goods?
    1. Ex-ship contract.
    2. FOB contract.
    3. CIF contract.
    4. None of the above.
75. In case of ex-ship contract, during voyage the goods are at the risk of the
    1. seller.
    2. buyer.
    3. caption of the ship.
    4. none of these.
76. In case of ex-ship contract, the ownership of the goods is transferred to the buyer when the
    1. goods are loaded on board the ship.
    2. goods are actually delivered at the port of destination.
    3. shipping documents are delivered to the buyer.
    4. shipping documents are handed over to the captain of the ship.
77. The buyer has the right
    1. to examine the goods before purchase.
    2. to have reasonable opportunity to examine the goods.
    3. to intimate defects in the goods to the seller.
    4. all of the above.

ANSWER KEYS

1. iv
2. i
3. iv
4. iv
5. iv
6. i
7. ii
8. iv
9. iv
10. i
11. i
12. i
13. iii
14. iv
15. iii
16. iv
17. ii
18. ii
19. iii
20. iii
21. ii
22. iii
23. iii
24. i
25. ii
26. ii
27. i
28. i
29. ii
30. ii
31. ii
32. ii
33. i
34. iii
35. i
36. iii
37. iv
38. ii
39. i
40. i
41. iii
42. iv
43. ii
44. i
45. iii
46. iii
47. i
48. ii
49. iii
50. ii
51. i
52. iv
53. iii
54. iii
55. ii
56. iii
57. iii
58. iii
59. iv
60. iv
61. i
62. ii
63. iv
64. iii
65. iv
66. iv
67. ii
68. ii
69. i
70. ii
71. i
72. iv
73. i
74. iii
75. i
76. ii
77. iv