CA Foundation Solutions For Business Laws – Unpaid Seller

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Unpaid Seller Self-Study Questions And Answers

Question 1. Define Unpaid Seller.

Answer:

Unpaid Seller

As per Section 45, the seller is deemed to be an unpaid seller, when:

  1. The whole of the price has not been paid or tendered and the seller had an immediate right of action for the price.
  2. A bill of exchange or other negotiable instrument was given as payment, but the same has been dishonored unless this payment was absolute and not conditional.

Question 2. What are the Rights of an Unpaid Seller?

Answer:

The Rights of an Unpaid Seller

  • Right of lien or retention
  • Right of stoppage in transit
  • Right of resale
  • Right to withhold delivery

Question 3. What are the Rights of unpaid sellers against the goods?

Answer:

The Rights of unpaid sellers against the goods

Seller’s lien (Section 47):

  1. It can be exercised on the goods for the price while he is in possession until the payment of the price of such goods. It can be exercised in the following cases:
    • Where the goods have been sold without any stipulation as to credit.
    • Where goods have been sold on credit but the terms of credit have expired.
    • Where the buyer becomes insolvent.
  2. The right depends upon physical possession.
  3. It can only be exercised for the non-payment of price.

Part Delivery (Section 48):

In case of part delivery, a lien can be exercised for remaining goods unless contrary provided in the agreement.

Question 4. Which Conditions will be Applies in Termination of lien?

Answer:

As per Section 49

This right is terminated under the following circumstances:

  • Where he delivers goods to a carrier or bailee for transmission to the buyer without reserving the disposal right.
  • Where the buyer or his agent lawfully obtains possession of goods.
  • Where the seller has waived the right of lien.
  • By estoppel

Question 5. What are the Rights of stoppage in transit?

Answer:

The Rights of stoppage in transit

  1. Right of stoppage in transit (Section 50)
  2. It means the right, to stop the further transit of goods, to resume possession, and to hold the same till the price is paid.
  3. It can be exercised in the following cases:
    • The seller must be unpaid
    • He must have parted with the possession of goods
    • Goods are in transit
    • The buyer has become insolvent
    • Right is subject to provisions of the act.
  4. Insolvent here means that a person has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due.

Question 6. What do you Understand by Duration of transit?

Answer:

Duration of transit

As per Section 51

Goods are deemed to be in transit from the time they are delivered to a carrier or another bailee for transmission until the buyer or his agent takes delivery of them.

  • The right is lost in the following cases:
    1. Buyer taking delivery
    2. Acknowledgment by carrier
    3. Delivery to ship
    4. Wrong denial to deliver by carrier
    5. Sub sale
    6. Goods in possession of the ship’s master acting as buyer’s agent
  • If the buyer rejects the goods and the carrier or bailee continues to be in its possession, the transit does not end, even if the seller refuses to receive them back.

Question 7. How stoppage in transit is affected?

Answer:

As per Section 52

It may be exercised by:

  1. Taking actual possession of goods or.
  2. Giving notice of his claim to the carrier or bailee who holds the goods.

Question 8. Distinguish between the right of lien and the right of stoppage in transit.

Answer:

Difference between the right of lien and the right of stoppage in transit

Unpaid Seller Distinguish Between Right Of Lien And Right Of Stoppage In Transit

Question 9. Define the Effect of sub-sale or pledge by buyer.

Answer:

The Effect of sub-sale or pledge by buyer

As per Section 53

It is not affected by any sale or other disposition of goods made by the buyer unless the seller has assented to it.

Question 10. What are the Rights of re-sale?

Answer:

The Rights of re-sale

As per Section 54

  1. It can be exercised in the following cases:
    • Where the goods are perishable, the buyer need not be informed of the intention of resale.
    • Where he gives notice to the buyer of his intention to resell the goods,” the buyer does not within or reasonable time pay or tender the price.
    • Where the right is expressly reserved in the contract.
  2. If no notice has been given to the buyer of the intention to re-sell, the unpaid seller cannot claim any damages and the buyer will be entitled to all profits.
  3. An unpaid seller can recover from the buyer the balance amount (if any) on resale.
  4. If notice has been given to the buyer, then the profit origin out of the sale of goods won’t be shared with the buyer. Only the seller with hold the samples.

Question 11. What are the Rights of the unpaid seller against the buyer?

Answer:

The Rights of the unpaid seller against the buyer

As per Section 55-61

Rights of unpaid seller against buyer:

  • Suit for price
  • Suit for damages for non-acceptance

Question 12. Write Short notes on the Suit for price.

Answer:

Suit for price

As per Section 55

Seller may sue

  • Where the property has passed to the buyer and he wrongfully neglects or refuses to pay for goods.
  • Where the property has not passed and the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price.

Question 13. Write Short notes on the Suit for damages for non-acceptance.

Answer:

Suit for damages for non-acceptance

As per Section 56

The seller may sue the buyer for non-acceptance, where he wrongfully neglects or refuses to accept and pay for the goods.

Question 14. Describe the Repudiation of the contract before the due date.

Answer:

The Repudiation of the contract before the due date

As per Section 60

If the buyer repudiates the contract before the date of actual delivery, the seller may treat the contract rescinded and sue for the breach.

Question 15. Write Short notes on Suit for Interest.

Answer:

Suit for Interest

As per Section 61

If there is a specific agreement for interest on price, the seller can recover interest from the date on which payment becomes due.

If no specific agreement, the seller may charge interest from the day he notifies the buyer about the payment being due.

Question 16. What are the Conditions that apply to Remedies of the buyer against the seller?

Answer:

The Conditions that apply to Remedies of the buyer against the seller

  • Damages for non-delivery
  • Suit for specific performance (only in case when goods are ascertained or specific)
  • Suit for breach of warranty.
  • Repudiation of the contract before the due date and suing for damages for breach
  • Suit for interest.

Question 17. What do you understand by Auction Sale?

Answer:

Auction Sale

As per Section 64

  • It is a mode of selling property by inviting bids publically and the property is sold to the highest bidder.
  • It is a public sale where goods are offered to be taken by bidders.
  • The auctioneer is only an agent of the seller.
  • Following rules apply
    1. Where goods are put up for sale in lots, each lot is treated to be the subject of a separate contract of sale.
    2. The sale is complete when the auctioneer announces its completion by fall of the hammer or in another customary manner.
    3. Right to bid may be reserved. expressly by or on behalf of the seller.
    4. If such right is not reserved, it is not lawful for the auctioneer knowingly to take any bid from the seller.
    5. A sale may be notified to be subject to a reserve or upset price.
    6. If the seller makes use of pretending bidding to raise the price, the sale is voidable at the buyer’s option.

Question 18. Write a Short note on the Inclusion of Increased or Decreased taxes as a contract of sale.

Answer:

The Inclusion of Increased or Decreased taxes as a contract of sale

As per Section 64A

  1. If after entering into the contract of sale, tax revisions take place.
  2. Buyer needs to pay the increased price in the case is an increase in taxes and vice versa unless anything contrary is stated in agreement.

Unpaid Seller Objective Questions And Answers

Question 1. State with reasons whether the following statement is Correct or Incorrect: The right of lien by an unpaid seller can be exercised for the nonpayment of the price of goods and other charges.

Answer:

Incorrect: The unpaid seller is given ‘right of lien’ over the goods, only in case of non-receipt of the price of goods and not for any other charges.

Question 2. State with reasons whether the following statements are Correct or Incorrect:

  1. In an auction sale, goods to be auctioned can be put for sale in lots.
  2. ‘Right of lien’ and ‘right to stoppage the goods in transit’ may be exercised simultaneously by an unpaid seller.

Answer:

  1. Correct: Section 64 of the Sale of Goods Act, 1 932 provides that in the auction sale where goods are put up for sale in lots, each lot is prima facie deemed to be subject to a separate contract of sale.
  2. Incorrect: The right of lien is exercisable as long as the seller owns goods whereas the Right of Stoppage in transit is exercisable as long as the goods are passing through channels of communication to reach in the hands of the vendee.

Question 3. State with reasons whether the following statements are Correct or Incorrect:

  1. After completion of the sale in an auction, the property in the goods and the risk of the loss caused in an accident to the auctioned property therein is transferred to the bidder.
  2. Where the goods are perishable the unpaid seller cannot re-sell the goods without any notice to the buyer.

Answer:

  1. Correct: Section 26 of the Sale of Goods Act, 1930 lays down that unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer. When property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not. Therefore, the property in the goods and the risk of loss thereof has been, passed to the bidder and the buyer has to bear the loss.
  2. Incorrect: According to Section 53(2) and (3) of the Sale of Goods Act, 1930, an unpaid seller should give a notice to the buyer of his intention to re-sell the goods. However, in respect of perishable goods, no such notice appears to be compulsory.

Question 4. State with reasons whether the following statement is Correct or Incorrect: In an auction sale, the seller or any other person on his behalf may bid at the auction.

Answer:

Correct: A bid can be made provided such a right is expressly reserved by the seller. According to Section 64(3) of the Sale of Goods Act, 1930, in the case of a sale by auction, a right of the bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained bid at the auction.

Question 5. State with reasons whether the following statement is Correct or Incorrect: Right of lien is linked with the possession of goods.

Answer:

Correct: The unpaid seller has a lien on the goods, for the price, while he has goods, until the payment or the tender of the price. A lien is a right to retain possession of goods, until payment of the price.

Question 6. State with reasons whether the following statement is Correct or Incorrect: In an auction sale a bid once made cannot be withdrawn by the bidder.

Answer:

Incorrect: The bidder can withdraw his bid anytime before the fall of the hammer i.e. completion of the sale.

Question 6. State with reasons whether the following statement is Correct or Incorrect: A seller of goods shall be called an ‘Unpaid seller’ even when a part payment of the price of goods sold has been made to him by a buyer.

Answer:

Correct: According to Section 45(1) of the Sale of Goods Act, 1 930 a seller of goods is deemed to be an unpaid seller when the whole of the price has not been paid. Hence the seller shall be called an unpaid seller even when a part payment of the price of goods has been made.

Question 7. State with reasons whether the following statement is Correct or correct: In an auction sale, the seller or any other person on his behalf may bid at the auction, if such a right is expressly reserved.

Answer:

Correct: According to Section 4(3) of the Sale of Goods Act, 1930 in an. Agreement to Sell the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled. Hence the property in the goods does not pass to the buyer immediately.

Unpaid Seller Short Notes

Question 1. Write a short note on: What are the remedies available to the buyer, when goods in the wrong quantity are delivered to him?

Answer:

The remedies available to the buyer, when goods in the wrong quantity are delivered to him

The wrong quantity may be either a short delivery to the buyer or a quantity of goods less than he contracted to sell the buyer may reject them. But if the buyer accepts the goods so delivered he shall pay for them at the contract price. By accepting the lesser quantity the buyer is not debarred from suing or damages on the ground of short delivery.

  1. Short delivery: When the seller delivers to the buyers a quantity of goods less than he contracted to sell the buyer may reject them. But if the buyer accepts the goods so delivered he shall pay for them at the contract price. By accepting the lesser quantity the buyer is not debarred from suing for damages on the ground of short delivery.
  2. Excess delivery: Where the seller delivers to the buyer a quantity of goods larger than contracted for the buyer has the option:
    • To accept the contracted quantity and reject the excess or
    • To accept the whole and pay for them at the contract price or
    • To reject the whole quantity.
  3. Mixed delivery: Where the seller delivers to the buyer the goods he contracted to sell mixed with the goods of a different description not included in the contract, the buyer may accept the goods which are per the contract and reject the rest, or reject the whole.

When the goods wrong quantity are delivered the buyer has the option to reject the whole lot and if he does so it does, not amount to cancellation of the contract. The seller has the right to deliver the goods contracted for and the buyer shall be bound to accept the same.

Question 2. Write a short note on the liability of an incoming partner.

Answer:

The liability of an incoming partner

An incoming partner is not liable for any act of the firm done before his admission as a partner. This is because the old partners were not the agents of the new partners at the time when they acted.

  • By a mutual agreement, the new partners may agree with the old partners to be liable for the past liabilities of the firm. However, the creditors of the firm cannot sue the new partners for their past debts, because there is no privity of contract between the creditors and the new partner.
  • Similarly, the acts of the old partner can not be ratified by the new partner because he was not in existence as a principal at the time when acts were done.

He is liable for the acts of the old firm only if the new firm assumes the liabilities of the old firm and the creditors accept the new firm as their debtor and discharge the old firm from his liability.

Question 3. Write a short note describing briefly the rights of the buyer against the seller in case of breach of contract of sale.

Answer:

Buyer’s rights against the seller in case of breach of contract: Sections 57 to 59 and 61 of the Sale of Goods Act, 1930, proceed to deal with the remedies of a buyer in cases where the seller commits a breach of the contract. They are as follows:

  1. Damages for non-delivery (Section 57): Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.
    • In this case, the general rules as regards the ascertainment of the damages given under Section 73 of the Contract Act, 1872, and the rule in Hadley vs. B Baxendale will be applicable.
  2. Suit for specific performance (Section 58): Where a property has passed to the buyer, he also can exercise another right, i.e. a right to sue for specific performance and its limits regulated by the Specific Relief Act.
    • In such cases, the court may, in its discretion grant a decree ordering the seller to deliver those specific or ascertained goods which formed the subject matter of the contract.
    • The remedy is discretionary and will only be granted if the goods are of a specific value or are unique, For Example., a rare book, a picture, or a piece of jewelry, and the damages are not an adequate remedy.
  3. Remedy for breach of warranty (Section 59): Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject of the goods; but he may:
    • Set up against the seller the breach of warranty in diminution or extinction of the price; or
    • sue the seller for damages for breach of warranty.
    • The measure of damage for breach of warranty is the estimated loss or damage arising directly or naturally from the breach, which is prima facie the difference between the value of the goods at the time of the delivery and the value they would have had if the goods had answered to the warranty.
  4. Suit for recovery of price (Section 61): The buyer has a right to recover the money paid to the seller where the consideration for payment of it has failed. For example, where the buyer is deprived of goods by their true owner, he may recover the price for breach of the condition as to title.

Question 4. Write a short note to Discuss the remedies available to the seller against the buyer in case of breach of contract of sale.

Answer:

Remedies available to the seller against the buyer: The following remedies are available to the seller against the buyer in case of a breach of the contract of sale:

1. Suit for price: Where the property in the goods has passed to the buyer or he was wrongfully neglected or refused to pay for the goods according to the terms of the contract, the seller may sue him for the price of goods.

  • Further, where the price is payable under the contract on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price.
  • The seller may sue him for the price even if the property of the goods has not passed and the goods have not been appropriated to the Contract. (Section 55). For instance, there was a sale of some quantity of iron to be delivered between 3rd May and 30th June.
  • If the buyers required, the price to be paid on the latter date at all costs By the 30th, only a portion of the iron had been delivered since the buyer did not require any further delivery.
  • In such a situation, the seller would be able to recover the whole price without showing that he had appropriated to the contract any specific iron to complete the delivery of the remainder.

Incidentally, the seller has a lien on the goods for the price while he owns them. The statement in a contract of sale that the seller would have the right to resell after notice will not deprive him of his legal right to sue for the price of the goods if he so desires.

2. Damages for non-acceptance (Section 56): Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance.

Some of the rights of an unpaid seller via., lien stoppage in transit, and resale are additional rights. These, however, do not compensate the seller for the breach of the contract but simply protect him from additional loss.

The breach of the contract, no doubt remains, and the seller is entitled to be compensated for the same. The above-referred remedies under Sections 55 and 56 deal with the remedies available to a seller and may be exercised by him (seller).

  • If the property in the goods sold has already passed to the buyer the seller can either sue for price or damages for nonacceptance [Section 55(1) and 56].
  • If the property in the goods sold has not passed the seller’s only remedy is to sue for damages for non-acceptance (Section 56), but the seller can even if the property has not passed, bring an action for the price if it is “payable on a day certain” and the buyer has failed to pay such price [Section 55(2)].
  • 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 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. In this case, the seller’s right will not be affected where the neglect or refusal of the buyer to take the delivery amounts to a repudiation of the contract – (Section 44).
  • The seller’s right of re-sale is available subject to the provisions of Section 54(2) and (4).
  • How much damages will be awarded to the seller in case of the breach of contract of sale by the buyer will be reassured according to the provisions of Sections 73 and 74 of the Indian Contract Act, 1872.

Question 5. Write a short note on: Who is an ‘Unpaid Seiler’? When can such a seller exercise his ‘Right of Lien’ against the goods? Explain the rules for exercising the right of lien by an unpaid seller.

Answer:

A seller be deemed to be an unpaid seller when:

  1. The whole of the price has not been paid or tendered.
  2. A bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled because of the dishonor of the instrument or otherwise. (Section 45(1) Sale of Goods Act, 1930).

Thus the following conditions must be fulfilled before the seller can be deemed to be an unpaid seller:

  1. He must be unpaid and the price must be due.
  2. He must have an immediate right of action for the price.
  3. A bill of exchange or other negotiable instrument was received but the same has been dishonoured.

Right of an unpaid seller:

Right of Lien:

A lien is a right to retain possession of goods until payment of the price. It is available to the unpaid seller who has the goods sold, where:

  1. The goods have been sold without any stipulation as to credit;
  2. The goods have been sold on credit, but the terms of credit have expired;
  3. The buyer becomes insolvent [Section 47(1)].

Rules regarding lien:

  1. The seller may exercise his right of lien notwithstanding that he has the goods as agent or bailee for the buyer [Section 47(2)]. If he loses the possession of the goods, he loses the right of lien also.
  2. The lien depends on actual possession and not on title. It is not affected even if the seller has parted with the document capable of transferring the title.
  3. The possession of the goods by the seller must not expressly exclude the right of lien.
  4. The lien can be exercised by the unpaid seller only for the price and not for any other charges such as warehouse or dock charges.
  5. Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder. He may refuse to deliver such remainder of the goods till he is paid for the goods already delivered and the goods are yet to be delivered.
  6. Where, however, a part of the goods is delivered under such circumstances as to show an agreement to waive the lien, the seller cannot retain the remainder [Section 48].
  7. The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree for the price of the goods [Section 49(2)].

Question 6. Write a short note on Stoppage in transit.

Answer:

Stoppage in Transit: (Section 50 Sale of Goods Act, 1930): It is a right to stop the goods while they are in transit, resuming possession of them and retaining possession until payment of the price.

This right is exerciseÿ by the seller when:

  1. He is unpaid.
  2. He may have parted with the possession of goods.
  3. The goods must be in transit.
  4. The buyer must have become insolvent.
  5. The right is subject to provisions of the Act.

The unpaid seller may exercise this right either by taking actual possession of the goods or by giving notice of his claim to the carrier, or other bailee in whose possession the goods are. The right of stoppage in transit begins when the right of lien ends.

Question 7. Write a short note on State the provisions given under the Sale of Goods Act relating to ‘Auction Sale’.

Answer:

Auction Sale: An ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the property is sold to the highest bidder. An auctioneer is an agent governed by the Law of Agency.

When he sells, he is only the agent of the seller. He may, however, sell his own properly as the principal and need not disclose the fact that he is so selling.

Under section 64 of the Sale of Goods Act, 1930 in the case of an auction:

  1. Where goods are put for sale in lots, each lot is prima facie deemed to be the subject matter of a separate contract of sale.
  2. The sale is complete when the auctioneer announces its completion by the fall of the hammer or in any other customary manner and until such announcement is made, any bidder may retract from his bid.
  3. Right to bid may be reserved expressly by or on behalf of the seller and where such a right is expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction.

Where the sale is not notified to be subject to the right of the seller to bid, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale.

  1. Or for the auctioneer knowingly to take any bid from the seller or any person representing him. Any sale contravening this rule may be treated as fraudulent by the buyer
  2. The sale may be notified to be subject to a reserve or upset price; and
  3. If the seller makes use of pretended bidding, to raise the price, the sale is voidable at the option of the buyer.

Question 8. Write a short note on the Unpaid seller’s right to re-sale.

Answer:

An unpaid seller’s right to resale: (Section 54 Sale of Goods Act, 1930).

  1. When the goods are perishable, the unpaid seller may re-sell the goods without any notice to the buyer.
  2. When the unpaid seller has exercised his right of lien or stoppage in transit, he has to give notice to the buyer of his intention to resell.
  3. Then only he will be entitled to recover any loss and keep all profits with him. Otherwise not. But so far as the new buyer’s title is concerned it will be good whether the seller gives or does not give notice to the first buyer.

Unpaid Seller Descriptive Questions And Answers

Question 1. Right of lien and Right of stoppage of goods in transit available to an unpaid seller.

Answer:

Right of Lien and Right of Stoppage In Transit:

  1. The unpaid seller’s right to stop the goods in transit arises only when the buyer is insolvent but the right of lien can be exercised even when the buyer can pay but does not pay.
  2. The right of lien can be exercised on goods that are in actual or constructive possession of the seller, while the right of stoppage in transit can be exercised when the goods are in the possession of a middleman between the seller who has parted with the possession of the goods and the buyer, who has not yet acquired the possession.
  3. The right of lien comes to an end when the possession of the goods is surrendered by the seller, but the right of stoppage in transit commences when the goods have left the possession of the seller and continues until the buyer has acquired their possession.
  4. The right of lien is to retain possession while the right of stoppage in transit is to regain or resume possession.

Question 2. What are the rights of an unpaid seller against goods under the Sale of Goods Act, 1 930?

Answer:

Rights of an unpaid seller against the goods under the Sale of Goods Act, of 1930 are:

  1. A lien or right of retention: An unpaid seller in possession of goods sold, may exercise his lien on the goods, i.e. keep the goods in his possession and refuse to deliver them to the buyer until the fulfillment or tender of the price. This right depends upon physical possession i.e. it is a possessory lien. Lien is cost as soon as the seller parts with the goods.
  2. The Right of Stoppage in Transit: The right of stoppage in transit is a right to stop the goods while they are in transit, resuming the possession of them and retaining possession until payment of the price.
  3. Right of re-sale: The unpaid seller may re-sell:
    • Where the goods are perishable.
    • Where such right is expressly resumed.
    • Where the seller tends to notify the buyer of his intention to re-sell and the buyer still does not tender the price within a reasonable time.
  4. Right to withhold delivery: If the property in the goods has passed, the unpaid seller has the right as described above. If however, the property has not passed, the unpaid seller has a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit.

Question 3. What are the rules that regulate the Sale by Auction’ under the Sale of Goods Act, of 1930?

Answer:

The rules that regulate the Sale by Auction’ under the Sale of Goods Act, of 1930

An ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the property is sold to the highest bidder. An auctioneer is an agent governed by the Law of Agency.

When he sells, he is only the agent of the seller. He may, however, sell his property as the principal and need not disclose the fact that he is so selling.

Legal Rules of Auction Sale: Section 64 of the Sale of Goods Act, 1930 provides the following rules to regulate the sale by auction:

  1. Where goods are sold in lots: Where goods are put up for sale, in lots, each lot, is prima facie deemed to be subject to a separate contract of sale.
  2. Completion of the contract of sale: The sale is complete when the auctioneer announces its completion by the fall of the hammer or in any other customary manner and until such announcement is made, any bidder may retract from his bid.
  3. Right to bid may be reserved: Right to bid may be reserved expressly by or on behalf of the seller and where such a right is expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction.
  4. Where the sale is not notified by the seller: Where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer.
  5. Reserved price: The sale may be notified to be subject to a reserve or upset price; and
  6. Pretended bidding: If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.

Question 4. Discuss the rights of an unpaid seller against the buyer under The Sales of Goods Act, of 1930.

Answer:

The rights of an unpaid seller against the buyer are as follows:

  1. Suit for price:
    • The seller may sue the buyer for the price if the buyer is unable to neglect or refuses to pay the price.
    • This may happen in any of the following cases:
      1. When the property in goods has passed to the buyer, but the buyer has failed to pay the price.
      2. When the price is payable on a certain day and the buyer fails to pay on that day.
      3. In the above cases, a seller may sue the buyer for the recovery of price, even though property in goods has not passed and the goods have not been appropriated to the contract.
  2. Suit for damages for non-acceptance: If the buyer refuses to accept and pay for goods, the goods may suffer damage due to delay, and the seller may sue the buyer for that
  3. Repudiation of the contract before the due date: When the buyer terminates the contract before the date of delivery, the seller may treat the contract as rescinded and sue for damages for the breach. This is also, known as ‘anticipatory breach of contract.
  4. Suit for interest: The seller may also sue the buyer for the interest along with a suit for the recovery of the price. In the absence of any agreement between the parties, the rate of interest will be decided by the court.

Question 5. Describe in brief the rights of the buyer against the seller in case of breach of contract of Sale.

Answer:

The rights of the buyer against the seller in case of breach of contract of Sale

As per the provisions of the Sale of Goods Act, of 1930, if the seller commits a breach of contract, the buyer gets the following rights against the seller:

  1. Damages for Non-Delivery (Section 57): Where the Seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.
  2. Suit for specific performance (Section 58): Where the seller commits a breach of contract of sale, the buyer can appeal to the court for specific performance. The court can order for specific performance only when the goods are ascertained or specific.
  3. Suit for breach of warranty (Section 59): Where there is a breach of warranty on the part of the seller, or where the buyer elects to treat a breach of condition as a breach of warranty, the buyer is not entitled to reject the goods only on- the basis of such breach of warranty. But he may-
    • Set up against the seller the breach of warranty in diminutions or extinction of the price, or
    • Sue the seller for damages for breach of warranty.
  4. Repudiation of the contract before the due date (Section 60): Where either, party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as subsisting and wait for bill the date of delivery or may treat the contract as rescinded and sue for damages for the breach.
  5. Suit for interest: Nothing of this Act, shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.

Question 6. AB sold 500 bags of wheat to CD. Each bag contains 50 Kilograms of wheat. AB sent 450 bags by road transport and CD himself took the remaining 50 bags. Before CD receives delivery of 450 bags sent by road transport, he becomes bankrupt. AB being still unpaid, stops the bags in transit. The official receiver, on CD’s insolvency, claims the bags. Decide the case regarding the provisions of the Sale of Goods Act, of 1930.

Answer:

The problem is based on section 50 of the goods in transit available to an unpaid seller.

The section states that the right is exercised by the seller only if the following conditions are fulfilled:

  1. The seller must be unpaid.
  2. He must have parted with the goods
  3. The goods must be in transit.
  4. The buyer must have become insolvent.
  5. The right is subject to the provisions of the Act.

Applying the provisions to the given case, AB being still unpaid, can stop the delivery of 450 bags sent by the transport as these goods are still in transit.

Question 7. An auction sale of certain goods was held on 7 March 2023 by the fall of the hammer in favor of the highest bidder X. The payment of the auction price was made on 8 March 2023 followed by the delivery of goods on 10 March 2023. Based upon on the provisions of the Sale of Goods Act, of 1930, decide when the auction sale is complete.

Answer:

As per Section 64 of the Sale of Goods Act, 1930, an ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the property is sold to the highest bidder.

  • As per the legal rules of ‘Auction Sale’ the sale is complete when the auctioneer announces its completion by the fall of the hammer or in any other customary manner and until such announcement is made, any bidder may retract from his bid.
  • In the above case, an auction sale was held on 7th March 2023 by the fall of the hammer, the auction price was made on 8th March 2023, and the delivery of goods was on 10th March 2023.

In the right of the above provisions, the auction sale was completed on 7th March 2023 by the fall of the hammer.

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