Business Regulations (COM3CJ201) — Module 3: Sale of Goods Act, 1930

• MODULE III: SALE OF GOODS ACT, 1930 Legislative Foundation & Historical Context Prior to July 1, 1930, the legal principles governing the purchase and sale of goods in British India were contained in Chapter VII (Sections 76 to 123) of the Indian Contract Act, 1872. With the expansion of industrial commerce, modern trading practices, and international maritime merchant customs, these initial statutory provisions proved inadequate. Consequently, the Sale of Goods Act, 1930 (Act III of 1930) was enacted, heavily inspired by the English Sale of Goods Act, 1893. The Act defines and amends the law relating to the sale of goods, laying down definitive rules on contract formation, transfer of ownership, risk allocation, conditions and warranties, performance, and remedies for unpaid sellers.

1. Nature and: Formation of Contract of Sale Under Section 4(1) of the Sale of Goods Act, 1930, a contract of sale of goods is formally defined as: "A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price." A contract of sale is a generic term encompassing two distinct legal transactions:

• Absolute Sale (Sale): Where the ownership (general property) in the goods is immediately transferred from the seller to the buyer upon contract execution (Section 4(3)).

Agreement to Sell (Conditional or Executory Sale): Where the transfer of the property in the goods is deferred to a future date or made contingent upon the fulfillment of specified conditions (Section 4(3)).

When the agreed time elapses or the conditions are satisfied, an agreement to sell matures into an absolute sale (Section 4(4)).

ESSENTIAL ELEMENTS OF A VALID CONTRACT OF SALE (SECTION 4) Statutory Prerequisites

1. Plurality of: Parties (Bilateral Relationship) There must be at least two distinct legal entities: a buyer (who buys or agrees to buy goods, Section 2(1)) and a seller (who sells or agrees to sell goods, Section 2(13)). A person cannot sell goods to oneself. Exception: A partowner can sell his undivided share to another part-owner, or a partner may purchase assets from a partnership firm upon dissolution.
2. Subject: Matter: Goods (Section 2(7)) The subject matter must be exclusively movable property. The Act strictly excludes immovable property, actionable claims (e.g., book debts), and current legal tender currency.

It includes stocks, shares, growing crops, grass, and severable fixtures.

3. Consideration: Price in Money (Section 2(10)) The consideration must be money (the legal currency of the realm). If goods are transferred exclusively in exchange for other goods without monetary evaluation, the transaction is pure barter or exchange, not a sale. However, a transaction combining goods and money (e.g., old car plus cash for a new car) constitutes a valid contract of sale.

1. Transfer of: General Property (Ownership) The contract must contemplate the transfer of general property (absolute proprietary ownership) in the goods, as distinguished from a mere special property (such as the possessory lien of a bailee, carrier, or pledgee under Section 172 of ICA 1872).
2. Exhaustive: Comparison: Sale vs. Agreement to Sell The distinction between a executed sale and an executory agreement to sell is fundamental, determining the exact moment when risk passes, who bears insolvency losses, and which specific legal remedies are available to the aggrieved party.

Basis of Distinction Sale (Executed Contract) Agreement to Sell (Executory Contract) Transfer of Ownership Property in goods passes immediately to the buyer upon contract execution, irrespective of physical possession.

Property in goods remains with the seller until the specified future time elapses or conditions are fulfilled.

Nature of Contract Executed contract; obligations regarding transfer of title are fully discharged.

Executory contract; mutual rights and obligations remain to be performed in the future.

Type of Legal Rights Creates a jus in rem (a right against the whole world to protect the goods against all third parties).

Creates a jus in personam (a personal right enforceable solely against the other contracting party).

Incidence of Risk (Section 26) Risk follows ownership (res perit domino). If goods are accidentally destroyed, the buyer bears the loss even if goods are still in seller's warehouse.

Risk remains with the seller. If goods perish without fault of either party, the loss falls entirely on the seller.

Consequences of Buyer's Breach Seller can sue the buyer directly for the recovery of the contract price (Section 55), in addition to interest.

Seller can only sue for unliquidated damages for non-acceptance (Section 56); cannot sue for the full price.

Consequences of Seller's Breach Buyer can claim specific recovery of goods from the seller or third parties, or sue in tort for conversion/detinue.

Buyer has only a personal claim for damages against the seller; cannot claim the physical goods.

Right of Subsequent Resale Seller cannot resell the goods. A subsequent resale confers no title, unless saved by statutory exceptions (Section 30(1)).

Seller retains title and can resell goods; original buyer's sole remedy is damages for breach of contract.

Insolvency of Buyer Official Receiver of the buyer is entitled to claim the goods from the seller, while seller can only claim ratable dividend.

Seller can refuse delivery of goods unless paid the full contract price in cash; does not part with goods.

Insolvency of Seller Buyer is entitled to claim the goods from the Official Receiver of the insolvent seller as property has vested.

Buyer can only prove as an unsecured creditor in insolvency for the advance money paid and claim a ratable dividend.

1. Contract of: Sale Distinguished from Other Transactions Sale vs. Hire-Purchase Agreement In a Sale, ownership transfers immediately or unconditionally at an agreed future date; the buyer cannot terminate the contract or return the goods at will. In a Hire-Purchase agreement, the hirer acquires mere possession as a bailee with an option (not an obligation) to purchase upon paying all agreed periodic instalments. Ownership remains with the financing owner until the final option instalment is cleared. If the hirer defaults, the owner can repossess the goods without treating the transaction as an unpaid seller's resale.

Sale vs. Contract for Work and Labour / Skill In a Contract of Sale, the primary essence and legal intention of the parties is the transfer of property in a physical chattel (e.g., buying a readymade suit, furniture, or computer hardware).

In a Contract for Work and Labour, the primary essence is the exercise of personal artistic, professional, or technical skill, with any material used being merely incidental (e.g., an artist commissioned to paint a portrait, an advocate drafting a legal deed, or a dentist fitting custom dentures).

Sale vs. Bailment Bailment (Section 148, ICA 1872) involves the transfer of mere possession of goods for a specific purpose under a contract that they shall be returned in specie or disposed of as directed.

Ownership never transfers. In a Sale, absolute ownership (general property) is permanently transferred, and the buyer has no legal obligation to return the identical goods to the seller.

Sale vs. Barter / Exchange Under Section 4(1), the statutory consideration in a contract of sale must be money price. In a contract of Barter or Exchange, goods are traded solely for other goods or services without any monetary assessment or settlement. While barter is governed by general contract principles, it is expressly outside the purview of the Sale of Goods Act, 1930.

1. Subject: Matter of Contract: Goods and Their Classification Under Section 2(7) of the Act, "Goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

CLASSIFICATION ARCHITECTURE OF GOODS (SECTION 6) ======================================================================================== SUBJECT MATTER (GOODS) | +---------------------------------------+---------------------------------------+ | | | EXISTING GOODS (Sec 6(1)) FUTURE GOODS (Sec 2(6)) CONTINGENT GOODS (Sec 6(2)) (Owned/possessed at time of contract) (To be manufactured/acquired) (Acquisition dependent on chance) | | | +------------------+ | | | | v v SPECIFIC GOODS UNASCERTAINED GOODS * Contract operates solely * Valid contract of sale (Sec 2(14)) (Defined by generic as an "Agreement to Sell" cannot exist; operates

• Identified and description/sample; * e.g., Next season's crop; as Agreement to Sell agreed upon at not earmarked) cotton to be woven in mill. * e.g.,

Goods arriving by formation time) | a specified cargo ship. | v | ASCERTAINED GOODS +----------> (Identified in accordance with contract subsequent to formation) ======================================================================================== DESTRUCTION AND PERISHING OF GOODS (SECTIONS 7 & 8) Frustration & Risk Allocation Goods Perishing Before Contract Formation (Section 7) Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract, the contract is void ab initio. This embodies the doctrine of mutual mistake of fact regarding the existence of the subject matter (Section 20 of ICA 1872).

Goods Perishing Before Sale but After Agreement to Sell (Section 8) Where there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish or become so damaged as no longer to answer to their description before the risk passes to the buyer, the agreement is thereby avoided. Both parties are discharged from their executory obligations without liability for damages.

1. Ascertainment and: Determination of Price (Sections 9 & 10) Price is the monetary consideration for a sale of goods (Section 2(10)). Without a valid price, no contract of sale can exist. Under Section 9, the price in a contract of sale may be:

Expressly fixed by the contract itself; or Left to be fixed in a manner thereby agreed (e.g., market rate prevailing on delivery date); or Determined by the course of dealing between the parties.

Where the price is not determined in accordance with the foregoing provisions, the buyer must pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

Agreement to Sell at Valuation by Third Party (Section 10) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and such third party cannot or does not make such valuation, the agreement is avoided.

• Proviso: If the goods or any part thereof have been delivered to and appropriated by the buyer, he must pay a reasonable price therefor. Where such third party is prevented from making the valuation by the fault of the seller or buyer, the innocent party may maintain a suit for damages against the defaulting party.

1. Conditions and: Warranties (Sections 11 to 17) In a contract of sale, parties make various representations and stipulations regarding the quality, identity, fitness, origin, and delivery of goods. Not all stipulations carry equal legal weight. Section 12 classifies them into Conditions and Warranties.

Condition (Section 12(2)) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. If a condition is broken, the aggrieved party has the legal right to reject the goods, terminate the contract, and recover any purchase money paid, alongside damages.

Warranty (Section 12(3)) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated. The buyer must accept the goods and can only claim monetary compensation or set off the damages against the price.

Basis Condition Warranty Nature & Vitality An absolute prerequisite going to the very root and foundation of the contract.

A subsidiary, collateral term subsidiary to the primary commercial purpose.

Remedies for Breach Repudiation of contract + rejection of goods + recovery of advance + damages.

Claim for damages only; no right to reject the goods or repudiate contract.

Conversion of Remedy Breach of condition can be treated as breach of warranty at buyer's option (Sec 13).

Breach of warranty can never be elevated to the status of breach of condition.

When Condition is Treated as Warranty (Section 13) Section 13 specifies the statutory circumstances under which a breach of condition is compulsorily or voluntarily reduced to a breach of warranty:

Voluntary Waiver (Section 13(1)): The buyer may elect to waive the condition altogether, or elect to treat the breach of condition as a breach of warranty and claim only damages.

Compulsory Treatment upon Acceptance (Section 13(2)): Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, unless there is an express or implied contract term allowing repudiation.

Excuse by Impossibility (Section 13(3)): Where fulfillment of a condition or warranty is excused by law by reason of impossibility or frustration.

1. Express and: Implied Conditions & Warranties Stipulations may be express (agreed upon explicitly in words, spoken or written) or implied (annexed by operation of law into every contract of sale unless specifically excluded by clear contractual terms).

A. Statutory Implied Conditions

1. Condition as to: Title (Section 14(a)) In every contract of sale, there is an implied condition on the part of the seller that: (i) in the case of an actual sale, he has a lawful right to sell the goods; and (ii) in the case of an agreement to sell, he will have a right to sell the goods at the time when property is to pass. If seller's title is defective, buyer can repudiate and recover full price.

• Leading Case: Rowland v. Divall (1923): A purchased a stolen motorcar from B in good faith and used it for several months. The true owner subsequently claimed the car. Held: A was entitled to recover the entire purchase price from B without deduction for the use of the car, as B had broken the fundamental condition as to title.

1. Condition in: Sale by Description (Section 15) Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond strictly with the description. If the goods delivered differ in physical identity, brand, or grade from what was described, the buyer may reject them.

• Leading Case: Varley v. Whipp (1900): Sale of a "second-hand reaping machine, nearly new, used only to cut 50 to 60 acres." On delivery, the machine was found to be very old, broken, and mended. Held: The buyer was entitled to reject the machine as it failed to correspond with the contract description.

1. Condition in: Sale by Sample (Section 17) In a contract for sale by sample, three implied conditions are annexed by statute:

The bulk must correspond with the sample in quality (Sec 17(2)(a)).

The buyer must have a reasonable opportunity of comparing the bulk with the sample (Sec 17(2)(b)).

Goods must be free from any latent defect rendering them unmerchantable, which would not be apparent on reasonable examination of the sample (Sec 17(2)(c)).

• Leading Case: Drummond v. Van Ingen (1887): Cloth sold by sample had a latent defect not discoverable by ordinary inspection. The tailors could not stitch it into coats. Seller held liable.

1. Sale by: Sample as well as Description (Section 15) Where goods are sold by sample as well as by description, it is not sufficient that the bulk corresponds with the sample if the goods do not also correspond with the verbal or written description.

• Leading Case: Nichol v. Godts (1854): Contract for sale of "foreign refined rape oil, warranted only equal to sample." Oil delivered matched the sample, but was adulterated with hemp oil. Held:

Buyer entitled to reject because goods did not correspond with description.

1. Condition as to: Fitness for Purpose (Section 16(1)) Ordinarily, seller does not guarantee fitness. But an implied condition arises when:

1. Buyer explicitly or impliedly makes known to seller the particular purpose for which goods are required;

2. Buyer relies on the seller's skill or judgment; and

3. Goods are of a description which seller supplies in course of business.

• Proviso: No implied condition in sale of specified article under patent or trade name.
• Leading Case: Priest v. Last (1903): A chemist sold a hot water bottle to a customer. While in use by customer's wife, it burst and scalded her. Held:

Chemist liable for damages as bottle was unfit for ordinary purpose.

1. Condition as to: Merchantable Quality (Section 16(2)) Where goods are bought by description from a seller who deals in goods of that description (whether manufacturer or not), there is an implied condition that goods shall be of merchantable quality (commercially usable and salable under description).

• Proviso: If buyer examined goods, condition does not apply regarding defects which such examination ought to have revealed.
• Leading Case: Grant v. Australian Knitting Mills (1936): Woollen underwear contained hidden excess sulphites causing acute dermatitis to buyer.
• Held: Retailer and manufacturer liable for breach of implied condition of merchantability.

1. Implied: Condition as to Wholesomeness In contracts for the supply of provisions, foodstuffs, and beverages, in addition to merchantable quality, there is an implied condition that the goods must be wholesome, hygienic, fit for human consumption, and free from toxic contaminants.

• Leading Case: Frost v. Aylesbury Dairy Co. (1905): Milk supplied by a dairy contained germs of typhoid fever.

The consumer's wife contracted typhoid and died. Held: The dairy company was strictly liable for breach of implied condition as to wholesomeness, even though ordinary care could not have detected the bacteria.

B. Statutory Implied Warranties

1. Quiet: Possession (Sec 14(b)) An implied warranty that the buyer shall have and enjoy quiet and undisturbed possession of the goods. If buyer's possession is disturbed by a third party having superior title or lawful charge, seller is liable for damages. (Mason v. Burningham (1949)).
2. Free from: Encumbrances (Sec 14(c)) An implied warranty that the goods are free from any charge, lien, mortgage, or hypothecation in favour of any third party not declared or made known to the buyer before or at the time when the contract is entered into.
3. Dangerous: Nature of Goods Where goods are inherently dangerous or volatile (e.g., chemicals, explosives) and seller knows buyer is ignorant of nature, seller has statutory duty to warn buyer; failing which seller is liable in damages (Clarke v. Army and Navy Coop).
4. The: Doctrine of Caveat Emptor & Its Modern Exceptions The traditional common law doctrine governing sales is expressed in the Latin maxim Caveat Emptor, meaning "Let the buyer beware." The General Rule (Section 16) "Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale." The law presumes that the buyer must exercise prudence, examine the merchandise, inspect for defects, and satisfy himself before concluding the transaction. In Ward v. Hobbs (1878), 32 pigs were sold at an auction "with all faults and errors of description." The pigs were infected with typhoid fever and died, infecting other pigs. Held: The seller was not liable because he made no representation, did not conceal defects, and the rule of Caveat Emptor applied.

STATUTORY & JUDICIAL EXCEPTIONS TO CAVEAT EMPTOR Consumer Protection Shift With modern mass production and specialized engineering, the rule of Caveat Emptor has been heavily restricted by statutory exceptions where the buyer is legally protected:

1. Fitness for: Specified Purpose (Sec 16(1)) Where buyer discloses particular purpose to seller and relies on seller's judgment/skill, seller must supply goods reasonably fit. (Baldry v.

Marshall (1925): Buyer asked for car suitable for touring; Bugatti supplied was totally unsuitable.

Seller held liable).

1. Merchantable: Quality (Sec 16(2)) Where goods are bought by description from a dealer, goods must be merchantable. If latent defects exist that reasonable inspection cannot reveal, Caveat Emptor does not apply.
2. Sale by: Sample (Sec 17) Buyer is entitled to receive goods matching the sample; if bulk fails to correspond or contains hidden unmerchantable defects, buyer can reject goods.
3. Sale by: Sample & Description (Sec 15) Bulk must correspond with both sample and descriptive terms; matching sample alone will not protect the seller.
4. Custom or: Usage of Trade (Sec 16(3)) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the established customs or usages of a particular commercial trade.
5. Fraud or: Misrepresentation by Seller Where seller actively conceals a latent defect (e.g., filling a crack in cannon with lead Horsfall v. Thomas) or commits fraud, Caveat Emptor has no application.
6. Transfer of: Property (Ownership) and Passing of Risk The phrase "Property in Goods" under the Sale of Goods Act signifies ownership, distinct from mere custody or physical possession. Determining the precise split-second when property passes from seller to buyer is critical because:

Risk follows ownership (Section 26): Res perit domino (the loss falls on the owner). If goods are lost or damaged, the owner bears the loss.

• Right of action against third parties: Only the owner can sue third parties for destruction or wrongful detention of goods.
• Insolvency rights: Determines whether the Official Assignee/Liquidator takes the physical goods or the party ranks as a general creditor.
• Suit for price: Seller can sue for the price only if ownership has passed to the buyer (Section 55).

RULES REGARDING PASSING OF PROPERTY IN GOODS (SECTIONS 18 TO 24) ========================================================================================

1. UNASCERTAINED GOODS (Sec 18):

• NO property can pass to buyer unless and until the goods are ASCERTAINED.

2. SPECIFIC GOODS IN DELIVERABLE STATE (Sec 20):

• Property passes IMMEDIATELY when contract is made, regardless of postponement of delivery or time of payment.

3. SPECIFIC GOODS TO BE PUT INTO DELIVERABLE STATE (Sec 21):

• Property does NOT pass until seller does that act AND buyer receives NOTICE thereof.

4. SPECIFIC GOODS TO BE WEIGHED/MEASURED TO ASCERTAIN PRICE (Sec 22):

• Property does NOT pass until weighing/measuring is done AND buyer has NOTICE.

5. UNASCERTAINED GOODS & UNCONDITIONAL APPROPRIATION (Sec 23):

• Property passes when goods answering description in deliverable state are UNCONDITIONALLY APPROPRIATED to contract with mutual assent of both parties.
• Delivery to carrier without reserving right of disposal = Unconditional Appropriation.

6. GOODS SENT ON APPROVAL OR "SALE OR RETURN" (Sec 24):

• Property passes: (a) When buyer signifies approval; (b) Does act adopting transaction (e.g., pledges goods - Kirkham v. Attenborough); (c) Retains without rejection past time. ========================================================================================
• Passing of Risk: Section 26 and Its Provisos
• General Principle: Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk whether delivery has been made or not.

Statutory Provisos to Section 26:

1. Delay in: Delivery: Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault.
2. Bailee: Duties Unaffected: Nothing in Section 26 affects the duties or liabilities of either seller or buyer as a bailee of the goods of the other party (e.g., duty of reasonable care under Section 151 of ICA 1872). 10. Transfer of Title: The Rule of "Nemo Dat Quod Non Habet" & Its Exceptions Under Section 27 of the Act, the fundamental rule of title is expressed in the ancient legal maxim: "NEMO DAT QUOD NON HABET" — No one can give what he does not possess.

A buyer cannot acquire a better title to the goods than what the seller himself possessed. If goods are sold by a thief or finder, the true owner can recover them from an innocent purchaser. However, to facilitate the security and speed of commercial trade, the Act provides well-defined statutory exceptions where a nonowner can confer an unimpeachable legal title to a bona fide purchaser for value without notice.

Exception & Section Statutory Conditions for Valid Title Leading Precedent

1. Mercantile: Agent (Sec 27 Proviso) (a) Agent is in possession with consent of true owner; (b) Sale made in ordinary course of business; (c) Buyer acts in good faith; (d) Buyer has no notice of agent's lack of authority.

Folkes v. King (1923); Pearson v. Rose & Young (1950).

1. Joint: Owner in Possession (Sec 28) If one of several joint owners of goods has sole possession by permission of co-owners, property in goods transfers to any person who buys them in good faith without notice of lack of authority.

Protects commercial purchasers buying from visible co-owner.

1. Voidable: Contract Possession (Sec 29) Seller obtained possession under a contract voidable under Section 19/19A of ICA 1872 (coercion, fraud, undue influence), and contract has not been rescinded at the time of sale to good faith buyer.

Phillips v. Brooks (1919); Lewis v. Averay (1972).

1. Seller in: Possession after Sale (Sec 30(1)) Where seller continues or is in possession of goods or documents of title after selling them, delivery or transfer by that seller to a bona fide buyer for value without notice confers valid title.

Protects second buyer against original owner who left goods with seller.

1. Buyer in: Possession before Sale (Sec 30(2)) Where buyer has obtained possession with consent of seller before title passed, delivery or resale by that buyer to an innocent third party confers valid ownership.

Lee v. Butler (1893).

1. Resale by: Unpaid Seller (Sec 54(3)) Where an unpaid seller who has exercised right of lien or stoppage in transit resells the goods, the subsequent buyer acquires a good title against original defaulting buyer.

Statutory commercial protection for unpaid seller realizations.

7. Estoppel (Sec 27 Main Clause) Where true owner by his conduct, acts, or representations leads buyer to believe that seller has authority to sell, owner is precluded (estopped) from denying seller's authority.

Pickard v. Sears (1837).

1. Miscellaneous: Legal Sales Sale by Finder of Lost Goods under Section 169 of ICA 1872; Sale by Pawnee/Pledgee under Section 176 of ICA 1872; Sale by Official Receiver or Liquidator under court order.

Statutory public officer powers. 11. Performance of the Contract: Rules as to Delivery Under Section 31, it is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Under Section 32, delivery of goods and payment of price are concurrent conditions unless agreed otherwise.

Modes of Delivery (Section 33)

• Actual Delivery: Physical transfer of goods from seller to buyer.
• Symbolic Delivery: Delivery of the means of obtaining possession (e.g., handing over keys of a warehouse, bill of lading, railway receipt).
• Constructive Delivery (Attornment): Change in legal character of possession without physical movement (e.g., seller agrees to hold goods as bailee for buyer, or warehouseman attorns that he holds goods on buyer's behalf).

Rules Regarding Delivery (Sections 35–39)

• Buyer must apply: Seller is under no duty to deliver until buyer applies for delivery (Sec 35).
• Place of delivery: Agreed place; failing which, place where goods are at time of sale/contract (Sec 36(1)).
• Time of delivery: Agreed time; failing which, within reasonable time at reasonable hour (Sec 36(2), 36(4)).
• Expenses of delivery: Borne by seller up to putting goods into deliverable state (Sec 36(5)).
• Delivery to Carrier: Prima facie deemed delivery to buyer (Sec 39(1)).

Delivery of Wrong Quantity (Section 37) Section 37 provides precise statutory remedies where seller delivers an incorrect quantity:

Short Delivery (Sec 37(1)): If seller delivers less than contracted, buyer may reject the entire lot; but if he accepts, he must pay for them at contract rate.

Excess Delivery (Sec 37(2)): If seller delivers more than contracted, buyer may: (a) accept contracted quantity and reject excess; (b) reject whole; or (c) accept whole and pay for excess at contract rate.

Mixed Goods (Sec 37(3)): If seller delivers contracted goods mixed with goods of a different description not included in contract, buyer may accept contracted goods and reject rest, or reject the entire lot.

1. Unpaid: Seller and His Comprehensive Rights Under Section 45(1) of the Act, a seller of goods is deemed to be an "Unpaid Seller":

When the whole of the price has not been paid or tendered; or When a bill of exchange, promissory note, or other negotiable instrument has been received as conditional payment, and the condition has failed by reason of the dishonour of the instrument or otherwise.

The term "seller" extends to an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid or is directly responsible for the price (Section 45(2)).

STATUTORY RIGHTS OF AN UNPAID SELLER (SECTION 46) ======================================================================================== RIGHTS OF UNPAID SELLER | +-----------------------------------+-----------------------------------+ | | RIGHTS AGAINST GOODS (In Rem) RIGHTS AGAINST BUYER (In Personam) (Sec 46 to 54) (Sec 55 to 61) | | +-----------------------------+ +-- 1.

Suit for Price (Sec 55) | | +-- 2. Suit for Damages for WHERE PROPERTY HAS PASSED WHERE PROPERTY HAS NOT PASSED Non-Acceptance (Sec 56) | | +-- 3.

Suit for Repudiation +-- 1. Right of Lien +-- Right of Withholding Delivery before Due Date (Sec 60) | (Sec 47-49) (Co-extensive with Lien & +-- 4.

Suit for Special +-- 2. Right of Stoppage Stoppage in Transit - Sec 46(2)) Damages & Interest (Sec 61) | in Transit | (Sec 50-52) +-- 3. Right of Resale (Sec 54) ======================================================================================== A. Right of Lien (Sections 47, 48, 49) The unpaid seller's lien is a right to retain possession of goods until payment or tender of the price. It is exercisable in three cases: (i) where goods are sold without any stipulation as to credit; (ii) where goods are sold on credit, but the term of credit has expired; and (iii) where the buyer becomes insolvent (Section 47(1)).

Key Rules on Lien Lien is purely a possessory right; it depends on continuous actual or constructive physical custody.

Can be exercised even if seller holds goods as agent or bailee for buyer (Sec 47(2)).

• Part delivery: Unpaid seller may exercise lien on remainder, unless part delivery shows intention to waive lien (Sec 48).

Loss / Termination of Lien (Section 49) The unpaid seller loses his lien:

1. When he delivers goods to a carrier or bailee for transmission to buyer without reserving right of disposal;

2. When the buyer or his agent lawfully obtains possession of goods;

3. By express or implied waiver of lien;

4. By obtaining a decree for the price, lien is NOT lost (Sec 49(2)).

B. Right of Stoppage in Transit (Sections 50, 51, 52) When the unpaid seller has parted with possession of the goods and the buyer becomes insolvent, the seller has the right of stopping the goods in transit (Section 50). This right enables the seller to resume possession of the goods while they are in the course of transit, and retain them until payment or tender of the price.

PREREQUISITES & DURATION OF TRANSIT (SECTION 51) Maritime & Carrier Law Essential Prerequisites: (1) Seller must be unpaid; (2) Seller must have parted with possession; (3) Goods must be in transit; (4) Buyer must be insolvent (unable to pay debts in ordinary course of business, Sec 2(8)).

When Transit Begins & Continues Goods are deemed in transit from the moment they are delivered to a carrier or other bailee for transmission to the buyer until the buyer or his agent takes delivery of them (Sec 51(1)).

When Transit Comes to an End Transit ends when: (a) Buyer takes delivery before arrival at destination (Sec 51(2)); (b) Carrier attorns to buyer that he holds goods on buyer's behalf (Sec 51(3)); (c) Carrier wrongfully refuses to deliver goods to buyer (Sec 51(6)); (d) Goods chartered by buyer and carrier acts as buyer's agent.

Basis of Comparison Right of Lien (Sec 47) Right of Stoppage in Transit (Sec 50) Possession of Goods Seller retains actual or constructive physical possession of goods.

Seller has parted with possession; goods are in custody of independent carrier.

Buyer's Solvency Can be exercised whether buyer is solvent (on credit expiry) or insolvent.

Can be exercised solely and exclusively when buyer is insolvent.

Point of Commencement Begins at time of contract and continues until seller parts with possession.

Begins only after seller parts with possession and continues until transit ends.

Nature of Right Right to retain possession already held. Right to regain and resume possession previously surrendered.

C. Right of Resale (Section 54) A mere exercise of lien or stoppage in transit does not rescind the contract of sale (Section 54(1)). The unpaid seller has a statutory right to resell the goods under Section 54:

1. Perishable: Goods (Section 54(2)) Where goods are of a perishable nature, unpaid seller may resell them immediately without giving notice to the buyer. Seller can recover any loss from defaulting buyer, and retain any surplus profit.
2. Non-Perishable: Goods with Notice (Sec 54(2)) Unpaid seller must give reasonable notice to buyer of intention to resell. If buyer does not pay within reasonable time: (a) Seller can resell; (b) Recover damages for loss; (c) Retain any profit realized on resale.
3. Resale: Without Notice (Section 54(2)) If seller resells non-perishable goods without giving notice: (a) Cannot recover loss/damages from original buyer; (b) Must hand over any surplus profit from resale to original buyer.
4. Express: Right of Resale Reserved (Sec 54(4)) Where contract expressly reserves right of resale on buyer's default, resale rescinds original contract.

Seller retains all profits and sues buyer for damages for breach. 13. Remedies for Breach of Contract of Sale (Sections 55 to 61) Seller's Remedies Against Buyer Suit for Price (Section 55): Where property has passed and buyer wrongfully refuses to pay, or price payable on a day certain irrespective of delivery.

Suit for Damages for Non-Acceptance (Section 56): Difference between contract price and market price at date of breach (Hadley v. Baxendale measure).

Suit for Interest (Section 61): Seller may recover reasonable interest on unpaid price from the date tender was due.

Buyer's Remedies Against Seller Suit for Non-Delivery (Section 57):

Damages measured by excess of market price over contract price on delivery date.

Suit for Specific Performance (Section 58): Court's discretionary decree compelling delivery of specific or ascertained goods.

Suit for Breach of Warranty (Section 59): Diminution/extinction of price, or separate action for damages.

Repudiation & Recovery of Price (Section 61): Refund of purchase price with statutory interest.

1. Special: Sales: Auction Sales (Section 64) Statutory Rules Governing Auction Sales (Section 64) Section 64 codifies commercial rules governing public auction sales:

• Lots: Where goods are put up for sale in lots, each lot is prima facie deemed the subject of a separate contract of sale (Sec 64(1)).
• Completion of Sale: Sale is complete when auctioneer announces completion by the fall of the hammer or other customary manner; bidder may retract bid before announcement (Sec 64(2)).
• Right to Bid: Right to bid may be reserved expressly by or on behalf of seller. If not notified, seller or puffer cannot bid (Sec 64(3), 64(4)).
• Reserve / Upset Price: Sale may be notified to be subject to a reserve or upset price (Sec 64(5)).
• Pretended Bidding: If seller makes use of pretended bidding (puffers) to raise price without notice, sale is voidable at the option of buyer (Sec 64(6)).
• Knock-Out Agreement: A mutual agreement among bidders not to bid against each other to keep price low is legal unless accompanied by fraud. 15. Landmark Case Law Matrix: Sale of Goods Act, 1930 Case Citation Salient Facts & Legal Issue Judicial Holding & Legal Ratio Baldry v. Marshall (1925) 1 KB 260 Buyer requested car "suitable for touring." Seller recommended Bugatti car. Car proved uncomfortable and totally unsuited for touring.
• Held: Requirement was an express condition of fitness for purpose (Sec 16(1)).

Mention of trade name "Bugatti" did not exclude condition as buyer relied on dealer's skill. Contract repudiated.

Grant v. Australian Knitting Mills (1936) AC 85 Buyer purchased woollen underwear from retailer. Garment contained excess chemical sulphites from manufacture, causing severe dermatitis.

• Held: Underwear was not of merchantable quality (Sec 16(2)) and unfit for use. Both retailer and manufacturer held liable in contract and tort for damages.

Rowland v. Divall (1923) 2 KB 500 Buyer bought car from seller and used it for 4 months. True owner reclaimed stolen car. Buyer sued seller for refund of entire price.

• Held: Seller breached fundamental condition as to title (Sec 14(a)). Total failure of consideration; buyer entitled to full price refund without deduction for use.

Niblett v. Confectioners' Materials Co. (1921) 3 KB 387 Sale of canned condensed milk branded "Nissly". Nestle seized goods for trademark infringement.

Buyer had to remove labels to sell at loss.

• Held: Seller breached implied condition as to title (Sec 14(a)) and warranty of quiet possession (Sec 14(b)) as seller had no right to sell goods infringing trademark.

Kirkham v. Attenborough (1897) 1 QB 201 Jeweller delivered jewellery to Winter on "sale or return." Winter pledged jewellery to pawnbroker Attenborough. Jeweller sued to recover.

• Held: Pledging goods was an "act adopting the transaction" under Sec 24. Property passed to Winter; pledge was valid; jeweller could not recover from pawnbroker.