CA Foundation Solutions For Business Laws – Transfer Of Ownership And Delivery Of Goods

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Transfer Of Ownership And Delivery Of Goods Self Study Questions And Answers

Question 1. Describe the rules relating to the passing of property in the Sale of Goods Act.

Answer:

The rules relating to the passing of property in the Sale of Goods Act

The sale of goods involves the transfer of ownership in three stages i.e. Passing of property → Delivery of goods → Passing of risk:

3.1 Passing of Property (Section 18-26)

  • It means passing or transferring ownership.
  • If the property has passed to the buyer, the risk in the goods sold is that of the buyer and not of the seller, though the goods may still be in the seller’s possession.

Question 2. What are the rules Related to the Transfer of Ownership?

Answer:

The rules Related to the Transfer of Ownership

  1. Risk passes with the ownership.
  2. Only owners have proprietary rights over the goods. The owner can take action in case goods are damaged by a third party. When there is a danger of good by the action of a third party.
  3. Seller’s right for price.
  4. If the buyer or seller is declared insolvent it is necessary to know the party with whom the property in goods is there to know if it can be taken over by an official assignee or not.
  5. Ownership and possession are two different concepts.

Question 3. Describe the Rules Regarding the Passing of Property in Specific Goods.

Answer:

The Rules Regarding the Passing of Property in Specific Goods

It happens as and when parties intend to pass. The intention must be gathered from the terms of the contract of the parties and the circumstances of the case.

Transfer Of Ownership And Delivery Of Goods The Rules Regarding

Where there is a contract for the sale of specific goods not in a deliverable state i.e. the seller has to do something to the goods to put them in a deliverable state, the property does not pass until that thing is done by the seller and the buyer has notice of it (Section 21).

  1. When there is a sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do something about the goods to ascertain the price, the property to the goods to ascertain the price does not pass until such act or thing is done and the buyer has notice of it (Section 22).
  2. Deliverable state refers to that state in which the buyer would be bound to take the delivery of goods.
    • The fact that the time of delivery or the time of the payment is postponed does not prevent the property from passing it once (Section 20).
    • If goods are delivered to the buyer “on approval” or sale or return basis”:

The property passes to the buyer when:

  1. He signifies his approval or acceptance to the seller.
  2. He does any other act adopting the transaction.
  3. He does not signify his approval or acceptance to the seller but retains goods beyond a reasonable time.

Question 4. What are the Rules relating to the Passing of Property in case of the Sale of Unascertained Goods?

Answer:

Rules relating to the Passing of Property in case of the Sale of Unascertained Goods

(Future Goods)

  • The property does not pass until the goods are ascertained.
  • The ascertainment of goods and their unconditional appropriation to the contract are the two pre-conditions for the transfer of property from seller to buyer.
  • Ascertainment of goods is the process by which the goods to be delivered under the contract are identified and set apart.
  • Section 23: The following conditions must be satisfied:
    1. Goods of description mentioned must be produced or obtained.
    2. They must be in a deliverable state.
    3. They must be unconditionally appropriated.

Note: Unconditional Appropriation of Goods is when the seller delivers the goods to the buyer or at a carrier or other bailee for transmission to the buyer.

  • The assent of parties may be given either before or after the appropriation.
  • In case of the sale of a quantity of goods out of a large quantity, the property will pass on the appropriation of the specified quantity by one party with the assent of the other.
  • The property in goods does not pass if the seller reserves the right of disposal of goods.

Question 5. Describe the Exceptions Relating to Sec.23 of the Sale of Goods Act.

Answer:

The Exceptions Relating to Sec.23 of the Sale of Goods Act

  1. If the goods are delivered to a railway administration for carriage by railway, the goods are deliverable to the order of the seller or his agent.
  2. If the seller sends a bill of exchange along with the bill of lading to the buyer for his acceptance, the property in goods does not pass unless he accepts the bill.

Question 6. Write the Exceptions regarding under Sec. 26 of the Sale of Goods Act,1930.

Answer:

The Exceptions regarding under Sec. 26 of the Sale of Goods Act,1930

  1. If there is agreement between the parties.
  2. If the delivery of goods is delayed either due to buyer’s or seller’s default, goods are at risk of party in default.
  3. Trade Customs.

Question 7. Describe the Rules Regarding the Transfer of Tile.

Answer:

The Rules Regarding the Transfer of Tile

Section 27

The general rule is where goods are sold by a person who is not the owner thereof and who does not Bell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than that the seller had.

This rule is expressed in the Latin maxim “Nemo dat quod non-habit” which means that no one can give what he has not got. i.e. no one can pass a better title than he has.

Example: A finds a ring of B and sells it to C, who purchases it in good faith so true owner B can have it from C.

Even a bonafide buyer gets no valid title.

Question 8. What are the Exceptions under Sec.27 of the Sale of Goods Act, of 1930?

Answer:

The Exceptions under Sec.27 of the Sale of Goods Act, of 1930

  1. Effect of estoppel
  2. Sale by mercantile agent
  3. Sale by joint owner
  4. Sale by a person in possession under a voidable contract.
  5. Sale by seller in possession after sale.
  6. Sale by the buyer in possession after sale.
  7. Sale by an unpaid seller
  8. Sale by the person under other laws

Question 9. Define the Effect of Estoppel.

Answer:

The Effect of Estoppel

Where the owner is stopped by the conduct from denying the seller’s authority to sell, the transferee will get a good title as against the true owner.

Sale by a Mercantile Agent Buyer will get a good title in the following cases:

  1. If he had goods or documents with the owner’s consent.
  2. If the sale was made by him when acting in the ordinary course of business.
  3. If the buyer had acted in good faith.
  4. At the time of the contract, the buyer had no notice of the fact that the seller had no authority to sell.

Question 10. What are the Rules Related to Sale by a Joint Owner (Co-owner)?

Answer:

The Rules Related to Sale by a Joint Owner (Co-owner)

As per Section 28

  • If one of the several joint owners,
  • Who is in sole possession of the goods by the permission of other co-owners,
  • Sell the goods,
  • The buyer gets a good title to the goods,
  • If done in good faith.

Question 11. Describe the Sale by a person in possession under a voidable contract.

Answer:

The Sale by a person in possession under a voidable contract

As per Section 29

A buyer acquires a good title if goods are sold to him by a seller having possession under a voidable contract, provided it has not been rescinded until the time of sale.

Question 12. What are the Rules related to the Sale by the seller in possession after sale?

Answer:

The Rules related to the Sale by the seller in possession after sale

As per Section 30

  • Where the buyer with the seller’s consent,
  • Obtain possession of goods before property in them has passed to him,
  • He may sell it to a third party,
  • Third-party obtains goods in good faith and without notice of the lien,
  • He would get a good title for them.

Question 13. Which Rule Applies in case of Sale by a person under other laws?

Answer:

  • A finder of goods has the power to sell the goods under certain circumstances also called a “Quasi Contract”.
  • Sale of goods pledged by Pawnee Conveys goods title to the buyer if
    • Pawner or pledger makes default
    • Pawnee has given reasonable notice to Pawnor
  • Sale by the official receiver, official assignee, receiver, or liquidator conveys the title of the goods to the buyer.

Question 14. What do you understand by the Performance of the Contract of Sale?

Answer:

Performance of the Contract of Sale

(Section 31-44)

  • It means voluntary transfer of possession from one person to another.
  • The seller has to deliver the goods.
  • The buyer has to accept the goods and pay for them per the contract.

Question 15. How many types of Delivery are there?

Answer:

Types of Delivery

Transfer Of Ownership And Delivery Of Goods Modes Of Delivery

Question 16. Describe all types of Delivery of Work Quantity.

Answer:

Types of Delivery of Work Quantity

  1. Delivery of Work Quantity
    • Short Delivery: Buyer may either accept the goods and pay for them at a contract rate or reject them.
    • Excess Delivery: Buyer may accept or reject the delivery. If he accepts the whole of it, he shall pay for them at the contract rate.
    • Mixed Delivery: Buyer may accept the relevant goods and reject the rest or reject the whole.
  2. Instalment Deliveries: Unless otherwise agreed, the buyer is not bound to accept delivery in installments.

Question 17. Describe the Suits for Breach of Contract.

Answer:

The Suits for Breach of Contract

Where the property in the goods has passed to the buyer, the seller may sue him for the price.

  • Where the price is payable on a certain day regardless of delivery; the seller may sue him for the price.
  • Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue him for damages for non-delivery.

Question 18. Write short notes on Acceptance of Delivery.

Answer:

Acceptance of Delivery

Acceptance is “deemed” to take place when the buyer:

  1. Intimates to the seller that he had accepted the goods,
  2. Does any act to the goods, which is inconsistent with the ownership of the seller,
  3. Retains the goods after the lapse of reasonable time, without intimating to the seller that he has rejected them.

Question 19. Write a short note of the following: Kinds of Delivery of Goods.

Answer:

Kinds of Delivery of Goods: Delivery means voluntary transfer of possession by one person to another [(Section 2(2)]. As a general rule delivery of goods may be made by doing anything which has the effect of putting the goods in the possession of the buyer or any person authorised to hold them on his behalf.

Delivery may be of three kinds which may be enumerated as follows:

  1. Actual delivery: It is actual when the goods themselves are delivered to the buyer or the key of a warehouse containing the goods is handed over to him.
  2. Constructive delivery: When it is effected without any change in the custody or actual possession of the thing as in the case of delivery by attornment (acknowledgment) For Example. where a warehouseman holding the goods of A agrees to hold them on behalf of B, at A’s request.
  3. Symbolic delivery: When there is a delivery of a thing in token of a transfer of something else, i.e., delivery of goods in case of transit may be made by handing over documents of title to goods, like bill of leading or railway receipt or delivery orders.

Transfer Of Ownership And Delivery Of Goods Descriptive Questions And Answers

Question 1. Comment on the following: Delivery of the goods and payment of the price are ‘concurrent conditions.

Answer:

Delivery of the goods and payment of the price are ‘concurrent conditions

The law in this regard is laid down in Section 32 of the Sale of Goods Act, of 1930. The section says that unless otherwise agreed the delivery of the goods and payment of the price are concurrent conditions, that is to say.

  • The seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of goods.
  • The general rule is that the obligations of the seller to deliver and that of the buyer to pay are implied concurrent conditions like mutual conditions precedent and that neither can enforce, that contract against the other without showing performance or offering’ to perform or averring readiness and willingness to perform his promise.
  • This section lays down the rule as regards what are known as reciprocal promises to be simultaneously performed.

In such a case no promisor needs to perform his promise unless the promisee is ready and willing to perform his reciprocal promise [Pandurang vs. Dadabhay (1902) 26 Bom. 643].

Question 2. When the property in the goods passes to the buyer in case of the delivery of the goods on an approval basis?

Answer:

Goods Delivered on Approval Basis: (Passing of the property). According to Section 24 of the Sale of Goods Act, 1930, the property in the goods passes to the buyer in case of the goods on an approval basis in the following manner:

  1. When he signifies his approval or acceptance to the seller, or
  2. Does any other act adopting the transaction, or
  3. If without signifying his approval or acceptance the buyer retains the goods without giving notice of rejection refection, then, if time fixed for the return of goods, on expiry of such time, and if no time is fixed, on the expiration of reasonable time.

Question 3. Comment on the following: Risk prima facie passes with the property in the goods.

Answer:

Section 26 of the Sale of Goods Act, of 1930 lays down the general rule that “risk prima facie passes with the property”. In other words, risk always follows ownership and the owner has to bear the burden or loss. Thus, whoever is the owner, carries the risk.

The goods remain at the seller’s risk until the ownership therein is transferred to the buyer and the goods are at the buyer’s risk when their ownership is transferred to him whether the delivery has been made to him or not.

However, there are following exceptions to the general rule that risk prima facie passes with the property:

  1. If the parties have by a special agreement stipulated that the risk will pass sometime after or before the ownership has passed.
  2. Where the delivery of the goods has been delayed due to the fault of either the seller or the buyer, in such cases the goods are at the risk of that party who is responsible for such fault as resulted in loss of any kind. The defaulting party will bear the loss.
  3. Sometimes trade customs may put the ownership and risk separately in two parties.

Question 4. When the ownership in the goods may be transferred by a poison who does not have title over it?

Answer:

The general rule of law is that ‘no one can give that which he has not got’. However under, the following cases the goods can be sold even by persons who do not have title over it.

  1. Sale by a person not the owner or title by estoppel. (Section 27): Sale of Goods Act i.e. where the true owner by his conduct, or by an act or omission, loads the buyer to believe that the seller has the authority to sell and induces the buyer to buy the goods he shall be estopped from denying the fact of want of authority of the seller. The buyer in such a case gets a better title than the seller.
  2. Sale by a mercantile agent (Proviso to Section 27): Provided the agent has the goods or documents of title to the goods with the consent of the owner; the agent sells the goods while acting in the ordinary course of business of a mercantile agent; the buyer acts in good faith and the buyer has not at the time of the contract of sale notice that the agent has no authority to sell.
  3. Sale by one of several joint owners (Section 28): If one of the several joint owners, who is in sole possession of the goods by permission of the other co-owners sells the goods, a buyer in good faith of those goods gets a good title to the goods.
  4. Sale by a person in possession under a voidable contract. (Section 29): Where the seller of goods has obtained the possession under a voidable contract, 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.
  5. Sale by seller in possession after sale [Section 30(1 )].
  6. By buyer in possession after sale [Section 30(2)].
  7. By an unpaid seller [Section 54(3)]

Question 5. What are the exceptions to the doctrine of “Nemo dat quad non-habet” (one cannot give a better title than what he has)?

Answer:

The exceptions to the doctrine of “Nemo dat quad non-habet”

The general rule is that the owner of goods can sell the goods. No one can convey a better title than he has. This rule protects the true owner as the buyer from a non-owner does not acquire a better title than what the seller had.

But the following are the exceptions to the above rule provided in the Sale of Goods Act, of 1930:

  1. Sale by a mercantile agent: A sale made by a mercantile agent of the goods or document of title to goods would pass a good title to the buyer in the following circumstances, namely:
    • If he had the goods or documents with the consent of the owner.
    • If the sale was made by him when acting in the ordinary course of business as a mercantile agent, and
    • If the buyer had acted in good faith and had at the time of a contract of sale, no notice of the fact that the seller had no authority to sell (Proviso to section 27).
  2. Sale can be made by co-owner (Section 28): If one of the several joint owners, who have the goods by permission of the other co-owners, sells the goods, a buyer in good faith of those goods gets a good title to the goods.
  3. Sale can be made by a person in possession under a voidable contract (Section 29): When the seller of goods has obtained their possession under a voidable contract, 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 defects of title.
  4. Sale can be made by the seller in possession after the sale [Section 30(1)]: Where a seller having sold goods, continues to own the goods or documents of title to the goods and sells them either himself or through a mercantile agent to a person who buys them in good faith and without notice of the previous sale, the buyer gets a goods title.
  5. Sale can be made by the buyer in possession [Section 30(2)]: When where a person, having bought or agreed to buy the goods, obtains, with the consent of the seller, possession of the goods or documents of title – to the goods and sells them, the buyer who acts in good faith and without notice of any lien or other rights of the seller in respect of the goods, gets a good title.
  6. Effect of Estoppel (Section 27): Where the owner is stopped by the conduct from denying the seller’s authority to sell, the transferee will get a good title as against the true owner.
  7. Exceptions in Other Acts:
    • Sale by a finder of lost goods under certain circumstances (Section 169 of the Indian Contract Act).
    • Sale by a pawnee or pledgee under certain circumstances (Section 176 of the Indian Contract Act).
    • Sale by an official receiver or official assignee or liquidator of a company.

Question 6. When the property in specific or ascertained goods passes to the buyer?

Answer:

Transfer of property in specific or ascertained goods to the buyer [Sale of Goods Act, 1930]: Passing of property implies passing of ownership. When property is transferred to the buyer, the risk of destruction or deterioration of the goods sold is that of the buyer and not of the seller, though the goods may still be in the seller’s possession.

  • Where there is a contract for the sale of specific or ascertained goods, the property in the goods is transferred to the buyer at such time as the parties to the contract intend it to be transferred (Section 19).
  • In an unconditional contract of sale of specific goods in a deliverable state. The property in the goods passes to the buyer when the contract is entered into. It is not affected by the time of payment of the price or the time of delivery of the goods (Section 20).
  • Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods to put them in a deliverable. state, the property does not pass until such a thing is done and the buyer has notice thereof (Section 21).
  • Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing for ascertaining the price, the property does not pass till such act or thing is done and the buyer has notice thereof (Section 22).

Question 7. State the rules of the Sale of Goods Act; relating to the delivery of goods:

  1. When it is given in installments.
  2. When it is more than the Contracted quantity.

Answer:

Rules of Sale of Goods Act, 1930 Relating to the Delivery of Goods:

1. Where delivery of goods is given in installments:

Unless otherwise agreed upon, the buyer of the goods is not bound to accept delivery in installments.

However, under a contract, the goods sold may be delivered in installments. In such a case each instalment shall be treated separately and paid for.

In the following two cases, there will be a breach of such a contract:

  1. Where the seller makes the delivery or makes defective delivery of one or more installments; or
  2. Where the buyer neglects or refuses to take delivery of one or more installments.

In each such breach, it will depend upon the terms of the contract and the circumstances of the case whether;

  • The whole contract is repudiated; or
  • It is a severable breach giving rise to a claim for compensation, but not a right to treat the whole contract as repudiated. (Section 38)

2. Where delivery of goods is given more than the contracted quantity:

Section 37(2) of the Act, Sale of Goods Act, of 1930 deals with such a case.

Where the seller makes a delivery to the buyer or his agent of the excess quantity of goods contracted for the buyer:

  • May accept the agreed quantity and reject the rest; or
  • He may reject the whole lot.
  • He may accept the whole lot even, and in such a case has to pay for the whole quantity at the contract rate.

Question 8. State the rules as to passing of the property, when goods are delivered on approval in a Contract of Sale.

Answer:

Section 24 of the Sale of Goods Act, of 1930 lays down rules as to the passing of property when goods are delivered on approval or “on return”. In such cases, property in goods passes either by acceptance or by failure to return.

1. By acceptance: The property in goods passes when the buyer signifies his acceptance or approval or otherwise adopts the transaction. Acceptance means acceptance of that part of the contract which makes him the purchaser.

  • That will be some act that signifies that he intends to be the absolute purchaser. If he does some act that will be right only if he were the absolute purchaser that signifies an acceptance or adoption within the statute where a person pawned the goods.
  • He had no power to return the goods unless he repaid the amount advanced by the Pawnee. That is inconsistent with his free power of returning the goods.

2. By failure to return (Section 24(2): The second circumstance in which the property in goods passes to the buyer, is when the latter fails to return the goods within a reasonable time or if a time has been fixed on the expiration of that time.

  • Till the expiry of such time, goods remain the property of the seller. Where 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 (Elphick v. Barnes (1880) SCPD. 32).
  • On failure to return within the specific time, the property passes to the buyer and the seller may then sue for price.

Where no time is fixed, the goods should be returned within a reasonable time, or else they become the property of the buyer. What is a reasonable time?

Question 9. Briefly answer the following: Risk in the goods sold passes with the delivery of goods to the buyer.

Answer:

Risk in the goods sold passes with the delivery of the goods to the buyer: Risk prima facie passes with ownership and not delivery. Passing the risk is not very much related to the delivery of goods.

  1. Unless otherwise agreed upon, the goods remain at the seller’s risk until the property therein has passed to the buyer.
  2. After passing the property to the buyer, the goods ‘remain at the buyer’s risk.
  3. Thus, the risk is more related to the passing of the title than to the delivery of the goods. The goods may be in the possession of the buyer but the title upon them may be with the seller.

Thus, unless as agreed upon, the goods remain at the seller’s risk subject to the following two qualifications:

  1. Delivery of the goods has been delayed by the fault of the buyer or the seller. In this case, risk will be in the party to the default, and
  2. Duties and liabilities of the seller or the buyer as bailee of goods for the other party remain unaffected even where the risk has passed generally. However, parties may by special agreement stipulate about the passing of the risk.

Question 10. Briefly answer the following: Transfer of property when goods are sold on approval.

Answer:

Goods on Approval:

Under Section 24 of the Sale of Goods Act, 1930 when goods are delivered to the buyer on approval, the ownership of such goods passes to the buyer in any of the following situations:

  1. When the buyer signifies his approval or acceptance to the seller.
  2. When the buyer does some act, amounts to the adoption of the transaction, i.e. the acceptance of the goods.
  3. When the buyer fails to return the goods on a fixed time, namely, retains It beyond the fixed time without notice of rejection.
  4. When no time has been fixed for the return of goods and the buyer retains the goods beyond reasonable time without giving notice of rejection. Reasonable time is a question of fact and hence will depend on the facts and circumstances of every case.

Question 11. “Nemo dat quod non habet” i.e. one cannot sell what he does not possess. Discuss this statement and state the exceptions to this doctrine.

Answer:

Stranger to a Contract

It is a general rule of law that only parties to a contract may sue and be sued on that contract. This rule is known as the “doctrine of privity of contract”.

Privity of contract means a relationship subsisting between the parties who have entered into contractual obligations. It implies a mutuality of will and creates a legal bond or tie between the parties. These are two consequences of doctrine:

  1. A person who is not a party to a contract cannot sue upon it even though the contract is for the benefit and he provided consideration.
  2. A contract cannot confer rights or impose obligations arising under it on any person other than the parties to it.

The following are the exceptions to the general rule that a stranger to a contract cannot sue:

  1. A trust or charge: A person in whose favor a trust or other interest in some specific immovable property has been created can enforce it even though he is not a party to the contract. (Madhav Trading Co. vs. Union of India).
  2. Marriage settlement, partition, or other family arrangements: Where an arrangement is made in connection with marriage, partition, or other family arrangements and a provision is made for the benefit of a person, he may sue although he is not a party to the agreement.
  3. Acknowledgment or estoppel: Where the promisor by his conduct, acknowledges or otherwise constitutes himself as an agent of the third party, a binding obligation is thereby incurred by him towards the third party.
  4. Assignment of a contract: The assignee of rights and benefits under a contract not involving personal skill can enforce the contract subject to the equities between the original parties. (Krishan Lai Sadhu vs. Promila Bala).
  5. Contracts entered into through an agent: The principal can enforce the contracts entered into by his agent provided the agent acts within the scope of his authority and in the name of the principal.
  6. Covenants running with the land: In case of transfer of immovable property, the purchaser of land with notice that the owner of the land is bound by certain conditions or covenants created by an agreement affecting the land shall be bound by them although he was not a party to the original agreements which contained the conditions of covenants.

Question 12. Explain the following: Meaning of Constructive Delivery

Answer:

Meaning of Constructive Delivery:

Where a third person (For Example., a bailee) who has the goods of the seller at the time of the sale acknowledges to the buyer that he holds the goods on his behalf, there takes place a delivery by attornment or constructive delivery [Section 36(3)]. Sale of Goods Act, 1930.

This may happen in the following cases:

  • Where the seller in possession of the goods agrees to hold them on behalf of the buyer.
  • Where the buyer owns the goods and the seller agrees to the buyer’s holding the goods as owner.
  • Where the third person in possession of the goods acknowledges to the buyer that he holds them on his behalf.

Question 13. What is meant by Constructive Delivery?

Answer:

Constructive Delivery of goods

Delivery may be actual or constructive. In actual delivery, the actual transfer of physical custody takes place, while in the case of constructive delivery.

  • The change in the possession of goods is caused without any change in their actual and visible custody.
  • For example, A sells to B 100 quintals of wheat lying in the possession of, a warehouseman; A makes delivery over to B, by an order to C, called a delivery order.
  • To transfer the wheat to B, and C accepts such an order by transferring the wheat in his books to B.

This would be considered a constructive delivery. Thus, constructive delivery may take place in any of the following manners:

  1. The seller in possession of the goods agrees to hold them on behalf of the buyer.
  2. The buyer owns the goods but the seller agrees to the buyer’s holding the goods as owner.
  3. A third person owns the goods but acknowledges to the buyer that he holds them on his behalf.

Question 14. What is the appropriation of goods under the Sale of Goods Act, of 1930? State the essentials regarding appropriation of unascertained goods.

Answer:

Appropriation of goods involves the selection of goods to use in the performance of the contract and with the mutual consent of the seller and the buyer.

The essentials regarding appropriation of unascertained goods are as follows:

  • There is a contract for the sale of unascertained goods or future goods.
  • The goods should conform to the description and quality stated in the contract.
  • The goods must be in a deliverable state.
  • Goods must be unconditionally appropriated.
  • The appropriation must be made by:
  • The seller with the assent of the buyer, or
  • The buyer with the assent of the seller.
  • The assent may be express or implied.
  • The assent may be given either before or after the appropriation.

Question 15. “A non-owner can convey better title to the bonafide purchaser of goods for value”. Discuss the cases when a person other than the owner can transfer title in goods as per the provisions of the Sales of Goods Act 1930.

Answer:

The general rule regarding the transfer, of title is that the seller cannot transfer to the buyer of goods a better title than he has.

If the seller is not the owner of goods, then the buyer also will not become the owner i.e. the title of the buyer shall be the same as that of the seller. This rule is Expressed as “Nemo datquodNon babe which means that no one can give what he has not got.

In the following cases, a non-owner can convey better title to the bonafide purchaser of goods for value:

  1. Sale by a Mercantile agent: A sale made by a mercantile agent of the goods for the document of title to goods would pass a good title to the buyer if the sale is made with the consent of the principal.
  2. Sale by One of the Joint Owners: If one of several joint owners of goods has sole possession of them by permission of the Co-owners, the property in the goods is transferred to any person who buys from such joint owner in good faith.
  3. Sale by a person in possession under voidable contract: A buyer would acquire a good title to the goods sold to him by a seller who had obtained possession of the goods under a contract voidable on the ground of coercion, fraud, etc. provided that the contract had not been rescinded until the time of sale.
  4. Sale by one who has already sold the goods but continues in possession thereof: If a person has sold the goods but continues to have them or of the documents of title to them.
    • He may sell them to a third person, and if such a person obtains the delivery thereof in good faith and without notice of the previous sale, he would have good title to them, although property in goods had passed to the first buyer earlier.
  5. Sale by buyer obtaining possession before the property in the goods has vested in him: Where a buyer with the consent of the seller. obtains possession of the goods before the property in them has passed to him.
    • He may sell, pledge, or otherwise dispose of the goods to a third person, and if such person obtains delivery of the goods in good faith and without notice of the lien, he would get a good title to them.
  6. Effect of Estoppel: Where the owner is estoppel by the conduct of denying the seller authority to sell, the transferee will get a good title as against the true owner.
  7. Sale by an unpaid seller: Where an unpaid seller who had exercised his right of lien or stoppage in transit, resells the goods, the buyer acquires a good title to the goods as against the original buyer.
  8. Sale under provisions of other Acts:
    • Sale by an official receiver or liquidator.
    • Purchase of goods from the finder of lost goods.
    • A sale by a pawnee can convey a good title to the buyer.

Question 16. Explain any six circumstances in detail in which the nonowner can convey better title to a Bona fide purchaser of goods for value as per The Sale of Goods Act, 1930.

Answer:

Transfer of title (section 27-30) of the Indian Sale of Goods Act, 1930: Subjects to the provisions of this act or any other law for the time being in force.

  • When the goods are sold by a person who is not the owner and 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.
  • In general, the rule regarding to transfer of title is that the seller cannot transfer to the buyer of a goods a better title than he has. If the seller is not the owner of the goods the buyer will also not become the owner.
  • The rule is explained in Latin maxim which says ‘Nemo dat quod nonhabit’ which means no one can give what he has not got.

But this rule has certain exceptions that say that the non-owner can convey a better title to a bona fide purchaser of goods:

  1. Sale by a mercantile agent: When the goods are sold by a mercantile agent the documents of title to goods would pass a good title to the buyer. In the following circumstances namely:
    • He has the possession of goods with the consent of the owner.
    • If the sale was made by him while acting as an agent in the normal course of business.
    • If the buyer has acted in good faith and has no notice of the fact that the seller has no authority to sell.
  2. Sale by one of the joint owners: If one of the several joint owners of the goods has sole possession of them by the permission of the other co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has no notice that has no authority to sell.
  3. Sale by a person in possession under a voidable contract: A buyer would acquire a better title to the goods sold to him by a seller who had obtained possession of goods under a contract voidable on the ground of coercion, fraud, etc. provided that the contract has not been rescinded until time of sale.
  4. Sale by one who has already sold the goods but continues in possession thereof: If a person has sold goods but continues to have them or of the documents of title to goods, he may sell them to a third person who obtains the delivery thereof in good faith, and without notice, he would have a good title to them.
  5. Sale by an unpaid seller: When an unpaid seller who has exercised his right of lien or stoppage in transit resells the goods the buyer acquires a better title to the goods as against the original buyer.
  6. Sale under the provisions of other Acts:
    • Sale by an official liquidator of the company which gives the purchaser a valid title
    • Sale of goods by a finder of lost goods which takes them under his custody
    • Sale by Pawnee will convey a better title to the buyer.

Question 17. “Risk Prima Facie passes with the property.” Elaborate in the context of The Sales of Goods Act, of 1930.

Answer:

Risk Prima Facie passes with property (Section 26):

  • The term risk means the liability to bear the loss if goods are lost or damaged.
  • The general rule is that risk follows ownership i.e. if the goods are lost or damaged at any point in time, the loss shall be borne by the owner of the goods.
  • Price has been paid or delivery has been made or not, is immaterial for passing of risk.

However, there are certain exceptions to the above rule:

  • If the loss or damage of goods is due to a delay in delivery, then the person who is responsible for such delay has to bear the loss.
  • If a party holds the goods a bailee (whether buyer or seller), then that person has to bear the risk in case of lost or damaged goods.
  • If the risk is separated either by an agreement or by a trade custom, then the person holding the risk has to bear the loss in case of loss or damage of goods.

In all these above cases, it is immaterial, whether the property has passed to the buyer or not.

Question 18. What are the consequences of the destruction of specified goods, before making of a contract and after the agreement to sell under the Sale of Goods Act, of 1930?

Answer:

The contract for the sale of specific goods is void ab initio if

  1. At the time when the contract was made,
  2. The goods have already perished or become so damaged that no longer correspond with their description in the contract.
  3. Without the knowledge of the seller. If both the parties to the contract are under mistake as to a matter of fact essential to the contract, then the contract is void ab initio due to a bilateral mistake.

Similarly, an agreement to sell specific goods also becomes void, if the goods perish or get damaged, after the making of the contract, without any fault on the part of the buyer or seller. This is due to the impossibility of performance due to subsequent events.

Question 19. What are the rights of unpaid sellers in the context of the resale of the goods under the Sale of Goods Act, of 1930?

Answer:

Right of re-sale [Section 54]: The right, of resale, is a very valuable right given to an unpaid seller. In the absence of this right, the unpaid seller’s other rights.

Against the goods that are lien and the stoppage in transit would not have been of much use because these rights only entitle the unpaid seller to retain the goods until paid by the buyer.

The unpaid seller can exercise the right to re-sell the goods under the following conditions:

Where the goods are perishable: In such a case, the buyer need not be informed of the intention of resale.

Question 20. Explain the following: Meaning of Constructive Delivery

Answer:

Meaning of Constructive Delivery:

Where a third person (For Example., a bailee) who has the goods of the seller at the time of the sale acknowledges to the buyer that he holds the goods on his behalf, there takes place a delivery by attornment or constructive delivery [Section 36(3)]. Sale of Goods Act, 1930.

This may happen in the following cases:

  1. Where the seller in possession of the goods agrees to hold them on behalf of the buyer.
  2. Where the buyer owns the goods and the seller agrees to the buyer’s holding the goods as owner.
  3. Where the third person in possession of the goods acknowledges to the buyer that he holds them on his behalf.

Question 21. What is meant by Constructive Delivery?

Answer:

Constructive Delivery of goods

Delivery may be actual or constructive. In actual delivery, the actual transfer of physical custody takes place while in the case of constructive delivery, the change in the possession of goods is caused without any change in their actual and visible custody.

For example, A sells to B 100 quintals of wheat lying in the possession of C, a warehouseman; A makes delivery over to B, by an order to C, called a delivery order, to transfer the wheat to B.

And C accepts such an order by transferring the wheat in his books to B. This would be considered a constructive delivery. Thus, constructive delivery may take place in any of the following manners:

  • The seller in possession of the goods agrees to hold them on behalf of the buyer.
  • The buyer has the goods but the seller agrees to the buyer’s holding the goods as owner.
  • A third person owns the goods but acknowledges to the buyer that he holds them on his behalf.

Question 22. What is an appropriation of goods under the Sale of Goods Act, of 1930? State the essentials regarding appropriation of unascertained goods.

Answer:

Appropriation of goods involves the selection of goods to use in the performance of the contract and with the mutual consent of the seller and the buyer

The essentials regarding appropriation of unascertained goods are as follows:

  1. There is a contract for the sale of unascertained goods or future goods.
  2. The goods should conform to the description and quality stated in the contract.
  3. The goods must be in a deliverable state.
  4. Goods must be unconditionally appropriated.
  5. The appropriation must be made by:
    • The seller with the assent of the buyer, or
    • The buyer with the assent of the seller.
  6. The assent may be express or implied.
  7. The assent may be given either before or after the appropriation.

Question 23. A non-owner can convey better title to the bonafide purchaser of goods for value”. Discuss the cases when a person other than the owner can transfer title in goods as per the provisions of the Sales of Goods Act 1930.

Answer:

The general rule regarding the transfer of title is that the seller cannot transfer to the buyer of goods a better title than he has.

  • If the seller is not the owner of goods, then the buyer also will not become the owner i.e. the title of the buyer shall be the same as that of the seller.
  • This rule is Expressed as “Nemo dat quod Nonbabe which means that no one can give what he has not got.

In the following cases, a non-owner can convey better title to the bonafide purchaser of goods for value:

1. Sale by a Mercantile agent: A sale made by a mercantile agent of the goods for the document of title to goods would pass a good title to the buyer if a sale is made with the consent of the principal.

In the following two cases, there will be a breach of such a contract:

  1. Where the seller makes the delivery or makes defective delivery of one or more installments; or
  2. Where the buyer neglects or refuses to take delivery of one or more installments.

In each such breach, it will depend upon the terms of the contract and the circumstances of the case whether:

  • The whole contract is repudiated; or
  • It is a severable breach giving rise to a claim for compensation, but not a right to treat the whole contract as repudiated. (Section 38)

2. Where delivery of goods is given more than the contracted quantity:

Section 37(2) of the Act, Sale of Goods Act, of 1930 deals with such a case.

Where the seller makes a delivery to the buyer or his agent of the excess quantity of goods contracted for the buyer:

  1. May accept the agreed quantity and reject the rest; or
  2. He may reject the whole lot.
  3. He may accept the whole lot even, and in such a case has to pay for the whole quantity at the contract rate.

Question 24. State the rules as to passing of the property, when goods are delivered on approval in a Contract of Sale.

Answer:

Section 24 of the Sale of Goods Act, of 1930 lays down rules as to the passing of property when goods are delivered on approval or“on return”. In such cases, property in goods passes, either by acceptance or by failure to return.

1. By acceptance: The property in goods passes when the buyer signifies his acceptance or approval or otherwise adopts the transaction.

  • Acceptance means acceptance of that part of the contract which makes him the purchaser absolutely. That will be some act that signifies that he intends to be the absolute purchaser.
  • If he does some act that will be right only if he were the absolute purchaser that signifies an acceptance or adoption within the statute where a person pawned the goods.
  • He had no power to return the goods unless he repaid the amount advanced by the Pawnee. That is inconsistent with his free power of returning the goods.

2. By failure to return (Section 24(2):

The second circumstance in which the property in goods passes to a buyer is when the latter fails to return the goods within a reasonable time or if a time has been fixed on the expiration of that time. Till the expiry of such time, goods remain the property of the seller.

  • Where 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 (Elphick v. Barnes (1880) SCPD. 32). On failure to return within the specific time, the property passes to the buyer and the seller may then sue for price.
  • Where no time is fixed, the goods should be returned within a reasonable time, or else they become the property of the buyer. What is reasonable time in a question fact in each case?

Question 25. Briefly answer the following: Risk in the goods sold passes with the delivery of goods to the buyer.

Answer:

Risk in the goods sold passes with the delivery of the goods to the buyer: Risk prima facie passes with ownership and not delivery. Passing of the risk is not very much related to the delivery of goods.

  • Unless otherwise agreed upon, the goods remain at the seller’s risk until the property therein has passed to the buyer. After passing the property to the buyer, the goods remain at the buyer’s risk.
  • Thus, the risk is more related to the passing of the title than to the delivery of the goods. The goods may be in the possession of the buyer but the title upon them may be with the seller.

Thus, unless as agreed upon, the goods remain at the seller’s risk subject to the following two qualifications:

  1. Delivery of the goods has been delayed by the fault of the buyer or the seller. In this case, risk will be in the party to the default, and
  2. Duties and liabilities of the seller or the buyer as bailee of goods for the other parts remain unaffected even where the risk has passed generally.

However, parties may by special agreement stipulate about the passing of the risk.

Question 26. Briefly answer the following: Transfer of property when goods are sold on approval.

Answer:

Goods on Approval:

Under Section 24 of the Sale of Goods Act, 1 930 when goods are delivered to the buyer on approval, the ownership of such goods passes to the buyer in any of the following situations:

  1. When the buyer signifies his approval or acceptance to the seller.
  2. When the buyer does some act which, amounts to the adoption of the transaction, i.e. the acceptance of the goods.
  3. When the buyer fails to return the goods on a fixed time, namely, retains it beyond the fixed time without notice of rejection.
  4. When no time has been fixed for the return of goods and the buyer retains the goods beyond reasonable time without giving notice of rejection.

Reasonable time is a question of fact and hence will depend on the facts and circumstances of every case.

Question 27. Nemo dat quod non habet” i.e. one cannot sell what he does not possess. Discuss this statement and state the exceptions to this doctrine.

Answer:

Stranger to a Contract

It is a general rule of law that only parties to a contract may sue and be sued on that contract. This rule is known as the “doctrine of privity of contract”.

Privity of contract means a relationship subsisting between the parties who have entered into contractual obligations. It implies a mutuality of will and creates a legal bond or tie between the parties.

These are two consequences of doctrine:

  1. A person who is not a party to a contract cannot sue upon it even though the contract is for the benefit and he provided consideration.
  2. A contract cannot confer rights or impose obligation arising under it on any person other than the parties to it.

The following are the exceptions to the general rule that a stranger to a contract cannot sue:

  1. A trust or charge: A person in whose favor a trust or other interest in some specific immovable property has been created can enforce it even though he is not a party to the contract. (Madhav Trading Co. vs. Union of India).
  2. Marriage settlement, partition, or other family arrangements: Where an arrangement is made in connection with marriage, partition, or other family arrangements and a provision is made for the benefit of a person, he may sue although he is not a party to the agreement.
  3. Acknowledgment or estoppel: Where the promisor by his conduct, acknowledges or otherwise constitutes himself as an agent of the third party, a binding obligation is thereby incurred by him towards the third party.
  4. Assignment of a contract: The assignee of rights and benefits under a contract not involving personal skill can enforce the contract subject to the equities between the original parties. (Krishan LaiSadhu vs. Promila Bala).
  5. Contracts entered into through an agent: The principal can enforce the contracts entered into by his agent provided the agent acts within the scope of his authority and in the name of the principal.
  6. Covenants running with the land: In case of transfer of immovable property the purchaser of land with notice that the owner of the land is bound by certain conditions or covenants created by an agreement affecting.

The land shall be bound by them although he was not a party to the original agreements which contained the conditions of covenants.

Question 28. Explain the following: Meaning of Constructive Delivery

Answer:

Meaning of Constructive Delivery:

Where a third person (For Example., a bailee) who has the goods of the seller at the time of the sale acknowledges to the buyer that he holds the goods on his behalf, there takes place a delivery by attornment or constructive delivery [Section 36(3)]. Sale of Goods Act, 1930.

This may happen in the following cases:

Where the seller in possession of the goods agrees to hold them on behalf of the buyer.

  • Where the buyer has the goods and the seller agrees to the buyer’s holding the goods as owner.
  • Where the third person in possession of the goods acknowledges to the buyer that he holds them on his behalf.

Question 29. What is meant by Constructive Delivery?

Answer:

Constructive Delivery of goods

Delivery may be actual or constructive. In actual delivery, the actual transfer of physical custody takes place while in the case of constructive delivery, the change in the possession of goods is caused without any change in their actual and visible custody.

For example, A sells to B 100 quintals of wheat lying in the possession of, a warehouseman. A makes delivery over to B, by an order to C, called a delivery order, to transfer the wheat to B, and C accepts such an order by transferring the wheat in his books to B.

This would be considered a constructive delivery. Thus, constructive delivery may take place in any of the following manners:

  • The seller in possession of the goods agrees to hold them on behalf of the buyer.
  • The buyer owns the goods but the seller agrees to the buyer’s holding the goods as owner.
  • A third person owns the goods but acknowledges to the buyer that he holds them on his behalf.

Question 30. What is an appropriation of goods under the Sale of Goods Act, of 1930? State the essentials regarding appropriation of unascertained goods.

Answer:

Appropriation of goods involves the selection of goods intending to be them in the performance of the contract and with the mutual consent of the seller and the buyer.

The essentials regarding appropriation of unascertained goods are as follows:

  1. There is a contract for the sale of unascertained goods or future goods.
  2. The goods should conform to the description and quality stated in the contract.
  3. The goods must be in a deliverable state.
  4. Goods must be unconditionally appropriated.
  5. The appropriation must be made by:
    • The seller with the assent of the buyer, or
    • The buyer with the assent of the seller.’
  6. The assent may be express or implied.
  7. The assent may be given either before or after the appropriation.

Question 31. A non-owner can convey better title to the bonafide purchaser of goods for value”. Discuss the cases when a person other than the owner can transfer title in goods as per the provisions of the Sales of Goods Act 1930.

Answer:

The general rule regarding the transfer of title is that the seller cannot transfer to the buyer of goods a better title than he has.

If the seller is not the owner of goods, then the buyer also will not become the owner i.e. the title of the buyer shall be the same as that of the seller.

This rule is Expressed as “Nemo dat quod Non habit” which means that no one can give what he has not got.

In the following cases, a non-owner can convey better title to the bonafide purchaser of goods for value:

  1. Sale by a Mercantile agent: A sale made by a mercantile agent of the goods for the document of title to goods would pass a good title to the buyer if a sale is made with the consent of the principal.
  2. Sale by One of the Joint Owners: If one of several joint owners of goods has sole possession of them by permission of the Co-owners, the property in the goods is transferred to any person who buys from such joint owner in good faith.
  3. Sale by a person in possession under voidable contract: A buyer would acquire a good title to the goods sold to him by a seller who had obtained possession of the goods under a contract voidable on the ground of coercion, fraud, etc. provided that the contract had not been rescinded until the time of sale.
  4. Sale by one who has already sold the goods but continues in possession thereof: If a person has sold the goods but continues to have them or of the documents of title to them.
    • He may sell them to a third person, and if such person obtains the delivery thereof in good faith and without notice of the previous sale, he would have good title to them, although property in goods had passed to the first buyer earlier.
  5. Sale by buyer obtaining possession before the property in the goods has vested in him: Where a buyer with the consent of the seller. obtains possession of the goods before the property in them has passed to him, he may sell, pledge, or otherwise dispose of the goods to a third person, and if such person obtains delivery of the goods in good faith and without notice of the lien, he would get a good title to them.
  6. Effect of Estoppel: Where the owner is estoppel by the conduct of denying the seller authority to sell, the transferee will get a good title as against the true owner.
  7. Sale by an unpaid seller: Where an unpaid seller who had exercised his right of lien or stoppage in transit, resells the goods, the buyer acquires a good title to the goods as against the original buyer.
  8. Sale under provisions of other Acts:
    • Sale by an official receiver or liquidator.
    • Purchase Of goods from the finder of lost goods.
    • A sale by a pawnee can convey a good title to the buyer.

Question 32. Explain any six circumstances in detail in which the nonowner can convey better title to a Bona fide purchaser of goods for value as per The Sale of Goods Act, 1930.

Answer:

Transfer of title (section 27-30) of the Indian Sale of Goods Act, 1930: Subjects to the provisions of this act or any other law for the time being in force, when the goods are sold by a person who is not the owner and 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.
  • In general, the rule regarding to transfer of title is that the seller cannot transfer to the buyer of a goods a better title than he has.
  • If the seller is not the owner of the goods the buyer will also not become the owner.
  • The rule is explained in Latin maxim which says ‘Nemo dat quod nonhabit’ which means no one can give what he has not got.

But this rule has certain exceptions which say that the non-owner can convey a better title to a bonafide purchaser of goods:-

  1. Sale by a mercantile agent: When the goods are sold by a mercantile agent the documents of title to goods would pass a good title to the buyer. In the following circumstances namely:
    • He has the possession of goods with the consent of the owner.
    • If the sale was made by him while acting as an agent in the normal course of business.
    • If the buyer has acted in good faith and has no notice of the fact that the seller has no authority to sell.
  2. Sale by one of the joint owners: If one of the several joint owners of the goods has sole possession of them by the permission of the other co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has no notice that has no authority to sell.
  3. Sale by a person in possession under a voidable contract: A buyer would acquire a better title to the goods sold to him by a seller who had obtained possession of goods under a contract voidable on the ground of coercion, fraud, etc. provided that the contract has not been rescinded until time of sale.
  4. Sale by one who has already sold the goods but continues in possession thereof:
    • If a person has sold goods but continues to have them or of the documents of title to goods, he may sell them to a third person who obtains the delivery thereof in good faith, and without notice, he would have a good title to them.
  5. Sale by an unpaid seller: When an unpaid seller who has exercised his right of lien or stoppage in transit resells the goods the buyer acquires a better title to the goods as against the original buyer.
  6. Sale under the provisions of other Acts:
    • Sale by an official liquidator of the company which gives the purchaser a valid title
    • Sale of goods by a finder of lost goods which takes them under his custody
    • Sale by Pawnee will convey a better title to the buyer.

Question 33. Risk Prima Facie passes with the property.” Elaborate in the context of The Sales of Goods Act, of 1930.

Answer:

Risk Prima Facie passes with property (Section 26):

  1. The term risk means the liability to bear the loss if goods are lost or damaged.
  2. The general rule is that risk follows ownership i.e. if the goods are lost or damaged at any point in time, the loss shall be borne by the owner of the goods.
  3. Price has been paid or delivery has been made or hot is immaterial for the passing of risk.
  4. However, there are certain exceptions to the above rule:
    • If the loss or damage of goods is due to a delay in delivery, then the person who is responsible for such delay has to bear the loss.
    • If a party holds the goods a bailee (whether buyer or seller), then that person has to bear the risk in case of lost or damaged goods.
    • If the risk is separated either by an agreement or by a trade custom, then the person holding the risk has to be the loss in case of loss or damage of goods.

In all these above cases, it is immaterial, whether the property has passed to the buyer or not.

Question 34. What are the consequences of the destruction of specified goods, before making of a contract and after the agreement to sell under the Sale of Goods Act, of 1930?

Answer:

The contract for the sale of specific goods is void ab initio if

  1. At the time when the contract was made,
  2. The goods have already perished or become so damaged that they no longer correspond with their description in the contract.
  3. Without the knowledge of the seller. If both the parties to the contract are under mistake as to a matter of fact essential to the contract, then the contract is void ab initio due to a bilateral mistake.

Similarly, an agreement to sell specific goods also becomes void, if the goods perish or get damaged, after the making of the contract, without any fault on the part of the buyer or seller. This is due to the impossibility of performance due to subsequent events.

Question 35. What are the rights of unpaid sellers in the context of the resale of the goods under the Sale of Goods Act, of 1930?

Answer:

Right of re-sale [Section 54]: The right, of resale, is a very valuable right given to an unpaid seller. In the absence of this right, the unpaid seller’s other rights against the goods that are lien and the stoppage in transit would not have been of much use because these rights only entitled the unpaid seller to retain the goods until paid by the buyer.

The unpaid seller can exercise the right to re-sell the goods under the following conditions:

1. Where the goods are perishable: In such a case, the buyer need not be informed of the intention of resale.

2. Where he gives notice to the buyer of his intention to re-sell the goods: If after the receipt of such notice, the buyer fails within a reasonable time to pay or tender the price, the seller may resell the goods.

It may be noted that in such cases, on the resale of the goods, the seller is also entitled to:

  • Recover the difference between the contract price and resale price, from the original buyer, as damages.
  • Retain the profit if the resale price is higher than the contract price. It may also be noted that the seller can recover damages and retain the profits only when the goods are resold after giving the notice of resale to the buyer.

Thus, if the goods are resold by the seller without giving any notice to the buyer, the seller cannot recover the loss suffered on resale.

Moreover, if there is any profit on resale, he must return it to the original buyer, i.e. he cannot keep such surplus with him [Section 54(2)1.

3. Where an unpaid seller who has exercised his right of lien or stoppage in transit resells the goods: The subsequent buyer acquires the good title thereof as against the original buyer, although the notice of re-sale has not been given by the seller to the original buyer.

4. A re-sale by the seller where a right of re-sale is expressly reserved in a contract of sale: Sometimes, it is expressly agreed between the seller and the buyer that in case the buyer defaults in payment of the price, the seller will resell the goods to some other person.

In such cases, the seller is said to have reserved his right of resale, and he may resell the goods on the buyer’s default. It may be noted that in such cases, the seller is not required to give notice of resale. He is entitled to recover damages from the original buyer even if no notice of resale is given.

5. Where the property in goods has not passed to the buyer: The unpaid seller has in addition to his remedies a right of withholding delivery of the goods. This right is similar to a lien and is called “quasilien”.

Question 36. Mr. D sold some goods to Mr. E for ₹ 5,00,000 on 1 5-day credit. Mr. D delivered the goods. On the due date, Mr. E refused to pay for it. State the position and rights of Mr. D as per The Sale of Goods Act, of 1930.

Answer:

When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such a request take delivery of the goods.

  • He is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods.
  • Provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract.
  • Thus, in the given case, Mr. D can recover damages from Mr. E and can repudiate the contract as well.

Question 37. Mr. G sold some goods to Mr. H for a certain price by issue of an invoice, but payment in respect of the same was not received on that day. The goods were packed and lying in the godown of Mr. G. The goods were inspected by H’s agent and were found to be in order. Later on, the dues of the goods were settled in cash. Just after receiving cash, Mr. G asked Mr. H that goods should be taken away from his godown to enable him to store other goods purchased by him. After one day, since Mr. H did not take delivery of the goods, Mr. G kept the goods out of the godown in an open space. Due to rain, some goods were damaged. Referring to the provisions of the Sale of Goods Act, of 1930, analyze the above situation and decide who will be held responsible for the above damage. Will your answer be different, if the dues were not settled in cash and are still pending?

Answer:

According to the facts of this case, it stands pretty much clear to the judgment of an independent observer that the property in the goods sold by Mr. G had already passed to Mr. H after the payment of dues and the examination of goods by the agent of Mr. H.

Hence it can be easily concluded that the liability for damage suffered by the goods would fall on the buyer i.e. Mr. H and not Mr. G since the transfer of title of the goods had already taken place before the damage occurred.

Question 38. State the various essential elements involved in the sale of unascertained goods and their appropriation as per the Sale of Goods Act, of 1930′.

Answer:

The property in unascertained goods or future goods does not pass until the goods are ascertained.

  • Such goods are defined only by description and not as goods identified and agreed upon when the contract is made.
  • The following rules are applicable for ascertaining the intention of the parties about the passing of property in respect of such goods.
  • The property in such goods passes to the buyer when the goods in a deliverable state are unconditionally appropriated to the contract.

Appropriation of goods involves the selection of goods to use in the performance of the contract and with the mutual consent of the seller and the buyer.

The essentials are:

  1. There is a contract for the sale of unascertained or future goods.
  2. The goods should conform to the description and quality stated in the contract.
  3. The goods must be in a deliverable state.
  4. The goods must be unconditionally appropriated to the contract either by delivery to the buyer his agent or the carrier.
  5. The appropriation must be made by:
    • The seller with the assent of the buyer, or
    • The buyer with the assent of the seller
  6. The assent may be express or implied.
  7. The assent may be given either before or after appropriation.

Question 39. Ms. R owns a two-wheeler which she handed over to her friend Ms. K on a sale or return basis. Even after a week Ms. K. neither returned the vehicle nor made payment for it. She instead pledged the vehicle to Mr. A to obtain a loan. Ms. R now wants to claim the Two Wheeler from Mr. A. Will she succeed?

  1. Examine the provisions of the Sale of Goods Act, of 1930, what recourse is available to Ms. R?
  2. Would your answer be different if it had been expressly provided that the vehicle would remain the property of Ms. R until the price has been paid?

Answer:

Goods sent on approval or on sale or return basis (Section 24) of the Sales of Goods Act, 1930. When the goods are delivered to the buyer on approval or a sale or return basis or other similar terms the property therein passes to the buyer.

  1. When he signifies his approval or acceptance to the seller or does any other act adopting the transaction.
  2. If he does not signify his approval or acceptance to the seller but retains the goods on the expiration of such time, if no time has been fixed, then on the expiration of the reasonable time.
  3. he does something to the goods which is equivalent to accepting the goods.

But sometimes, it may be noted that where goods have been delivered by a person on ‘Sale or return’ on the terms that the goods well to remain the property of the sellers till they are paid, for, the property therein does not pass to the buyer until the terms are complied with i.e. cash is paid for.

In the given case Mr. R owns a two-wheeler which she handed over to her friend MSK on a sale or return basis After a week MSK neither returned the vehicle nor made payment for it. She instead pledges the vehicle to Mrs. A to obtain a loan.

  1. Thus, according to this case, Mr. R has no right against Mr. A. He can only recover the price of the two-wheeler from Mr K.
  2. Yes, my answer would be different if it had been expressly provided that the vehicle would remain the property of Mr. R until the price has been paid then it says that at the time of the pledge, the ownership was not transferred to Mr. K. Thus, the pledge was not valid and R can recover from the two-wheeler from A as well.

Question 40. Mr. T was a retail trader of fans of various kinds. Mr. M came to his shop and asked for an exhaust fan for the kitchen. Mr. T showed him different brands and Mr. M approved of a particular brand and paid for it. A fan was delivered to Mr. M’s house; at the time of opening the packet, he found that it was a table fan. He informed Mr. T about the delivery of the wrong fan. Mr. T refused to exchange the same, saying that the contract was complete after the delivery of the fan and payment of the price.

  1. Discuss whether Mr. T is right in refusing to exchange as per provisions of the Sale of Goods Act, of 1930.
  2. What is the remedy available to Mr. M?

Answer:

Legal Provision: According to Section 15 of the Sales of Goods Act, of 1930. Where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with the description.

  • This rule is based on the principle that “if you contract to sell peas, you cannot compel the buyer to take beans.” The buyer is not bound to accept and pay for goods which are not following the description of the goods.
  • Thus, it has to be determined whether the buyer has undertaken to purchase the goods by their description, i.e., whether the description was essential for identifying the goods where the buyer had agreed to purchase.
  • If that is required and the goods tendered do not correspond with the description, it would be a breach of condition entitling the buyer to reject the goods.
  • It is a condition that goes to the root of the contract and the breach of it entitles the buyer to reject the goods whether the buyer can inspect them or not.
  • Fact: Here in the given problem, Mr. M went to Mr. T’s (retail trader) shop and asked for an exhaust fan approved a particular brand, and paid for it.

The fan which was delivered to M’s house was a table fan. So, he asked Mr. T to exchange the same but Mr. T refused to do so.

Conclusion: Applying the above legal provision is the given problem we can conclude as follows:

  1. Mr. T is not right he can’t refuse to exchange the fan as the goods are not according to the description. The buyer has asked for an exhaust fan and the seller has supplied a table fan condition as to description is breached.
  2. The remedy available to Mr. M-Mr. M can repudiate or rescind the contract, i.e. he can return the table fan and ask for damages or both.

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