Sale of Goods Act

1. Sale of Goods Act Business Contract Law www.assignmentpoint.com

2. Definition Goods, Buyer & seller • Buyer & seller • Goods are “means every kind of movable (not attached with earth) property (except -actionable claims and money) at the time contract” – • and includes 4[electricity, water, gas,] 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 www.assignmentpoint.com

3. Goods can be classified as three types – Existing goods • “specific goods” means goods identified and agreed upon at the  time a contract of sale is made; • “generic goods” means goods not separately identified and indicated by description at the  time a contract of sale is made; Future goods means goods to be manufactured or produced or  acquired by the seller after the making of the contract of sale;  Contingent goods www.assignmentpoint.com

4. Definition- Merchants • Merchants- A merchant is someone who routinely deals in the particular goods involved, or who appears to have special knowledge or skill in those goods, or who uses agents with special knowledge or skill in those goods. • A merchant: Must act in Good Faith- For non-merchants, good faith means honesty-in-fact. For a merchant, good faith means honesty-in-fact, plus the exercise of reasonable commercial standards of fair dealing. www.assignmentpoint.com

5. Sale and agreement to sell A contract of sale of goods is a  contract whereby the seller transfers or agrees to transfer the  property in goods to the buyer for a price. There may be a contract of  sale between one part-owner and another.  A contract of sale may be absolute or conditional . But where the transfer of the property in the goods is to take  place at a future time or subject to some condition thereafter to be  fulfilled, the contract is called in agreement to sell.  An agreement to sell becomes a sale when the time elapses or the  conditions are fulfilled subject to which the property in the goods is  to be transferred. www.assignmentpoint.com

6. Formalities of the Contract • A contract of sale is made by an  offer to buy or sell goods for a price and the acceptance of such  offer. The contract may provide for the immediate delivery of the  goods or immediate payment of the price or both, or for the delivery or payment by installments, or that the delivery or payment or both  shall be postponed.  • a  contract of sale may be made in writing or by word of mouth, or partly  in writing and party by word of mouth or may be implied from the  conduct of the parties. • Goods perishing before making of contract. the contract is void if the  goods without the knowledge of the seller have, at the time when the  contract was made, perished or become so damaged as no longer to  answer to their description in the contract. • Goods perishing before sale but after agreement to sell. the agreement is thereby avoided. www.assignmentpoint.com

7. The elements for sale of goods are • Movable Goods , • Movable Goods For Money • Two Party Agreement To Sale- Buyer And Seller • Method Of Forming Contract –Oral/ Written/ Implied • Terms ( Time , Place And Mode Of Delivery ) • Other Essential Element . Goods must exist before title can pass.Goods must be identified to the contract before title can pass, 3) The parties may agree in their contract how and when they will identify the goods. www.assignmentpoint.com

8. Price -money consideration for sale of goods • The price in a contract of sale may  be fixed by the contract or may be determined by the course of dealing between the  parties.  Where the price is not determined in accordance with the foregoing  provisions, the buyer shall pay the seller a reasonable price. So If the goods or any part had been delivered to and appropriated by the buyer he should pay a reasonable price • Goods may be sold on the condition that the valuation is to be made by third party and if thethird party can’t make valuation for the conditional goods - agreement become void. where third party is prevented for not making valuation by the fault of the buyer or seller – the party not in fault is entitled to damages • Earnest money – is the security for the fulfillment of agreement . If the contract is broken by the buyer , the seller is to retain the earnest money as compensation . Where if the contract is fulfilled the amount is credited to the purchase price payable www.assignmentpoint.com

9. Bailment, hire purchase agreement • Bailment-Bailment means that one person or company is legally holding goods for the benefit of another. If the contract requires a bailee to hold the goods for the buyer, the risk passes when the buyer obtains documents entitling her to possession, or when the bailee acknowledges her right to the goods • Hire purchase agreement is one under which a person take s delivery of goods promising to pay the price by a certain number of installment and until full payment is made , – so its agreement to sale + bailment • Entrustment -Entrusting means delivering goods to a merchant or permitting the merchant to retain them. Entrusting to a merchant who deals in goods of that kind gives him power to transfer all rights to a buyer in the ordinary course of business. www.assignmentpoint.com

10. Destruction of goods , Sale on Approval, Sale or Return • Destruction of goods – • goods perishing/ damage before making a contract- contract is void • goods perishing/ damage before sale but after agreement to sale – agreement is avoided • Sale on Approval • When a buyer takes goods intending to use them herself but has the right to return. In a sale on approval, the goods are not subject to the buyer’s creditors until the buyer accepts them. • Sale or Return • When a buyer takes goods intending to resell them, but has the right to return them. www.assignmentpoint.com

11. Conditions &Warranty • Conditions – is a stipulation essential tothe main purpose of contract,the breach of which gives rise to a right to treat the contract as repudiated . • Warranty- is stipulation collateral to the main purpose breach of which give rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated • Whether a stipulation in a contract of sale is a condition or warranty depend in each case on the construction of contract. A stipulation may be condition but can be called warranty • Stipulation of time of payment depends on the terms of contracts. Any other stipulation of time not depend on the terms of contract Whether a stipulation in contract of sale is a condition or a warranty depends in each cease on the construction of the contract. A stipulation may be a condition, though called a warranty in the  contract.  www.assignmentpoint.com

12. When condition to be treated as warranty When a condition can be treated as warranty • voluntary – the buyer may elect to treat a breach of condition as a breach of warranty • compulsory ( time) waiver of conditions- buyer has accepted the goods or a part thereof , he cannot repudiate the contract but can sue for damages Consequence of breach of condition • If one of the condition is broken • Repudiations of contract before due date Consequence of breach of warranty • set up against the seller the breach of warranty in reduction or loss of the price • Sue the seller for damages www.assignmentpoint.com

13. Implied Conditions &Warranty • Implied Conditions • Sale as to title- seller must have the right to sell • Sale by description – correspond with the description • Sale by sample- correspond with the sample • Sale by sample as well as description • Condition as to fitness of quality ( cases from book) • the particular purpose for which the goods are required • buyer relies on the seller's skill or judgment • Implied Warranty • The buyer must get quite possession] • The good must be free from encumbrance • Fitness of goods required for purpose , may be wrranted by usage of trade-goods must be of quality generally acceptable in trade, must be able to do what is expected- I.e. an umbrella will keep water off user. • Express Warranties- (created by seller’s promise as to quality, safety, performance or durability of goods- may be created: from sample or model, description of attributes ,seller’s statements or promises www.assignmentpoint.com

14. Transfer of ownership • Unascertained goods are not transfer unless they are ascertained • For the sale of specific goods Property passes when intended to pass • The property in the goods passes in the sale of specific goods , if there is unconditional contract, the goods can be immediately delivered and , parties themselves have not fixed a different time for the passing of property . • Property will not transfer when seller has something to do to make them into deliverable state -seller completes all obligations regarding delivery of goods. • Property will not transfer when seller has to be measured, tested • Property will not transfer, when the seller has to do anything thereto in order to ascertain price. • ownership transferred in case of unconditional appropriation – Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer, • If the seller gives the goods to buyer carrier-when the goods: arrive for shipment at the train yard, arrive for shipment at a port, arrive at the buyer’s warehouse, • Goods sent on approval or sale or return The parties may allocate the risk of loss any way they wish – like If the goods leave the seller’s warehouse, are halfway between buyer and seller www.assignmentpoint.com

15. Transfer of title Transfer of title by non owner • estoppels • sale by mercantile agent • Sale by one or several joint owner • Sale of goods obtained under voidable agreement • Sale by the seller in possession of goods after sale • Buyer in possession of goods over which the seller has some rights • An unpaid seller • One who found the goods – after reasonable search the owner When the Seller Has Imperfect Title- • A void title is no title at all. If seller sells stolen property, title does not pass to buyer - Buyer beware! • A voidable title gives limited rights in the goods; inferior to those of the owner. A person with voidable title has power to transfer valid title for value to a good faith purchaser, generally called a bona fide purchaser www.assignmentpoint.com

16. Risk of loss • Risk passes with property . If the goods are lost , damaged the loss fall on the owner • If it is damaged by the third party it is the owner who can take action • If the owner become insolvent only the goods will be taken out by the official assignee . No matter who was buyer or seller then So it is important to find out who is the owner between buyer and seller • Many merchants specify who bears the risk of loss by using common shipping terms • If parties fail to allocate the risk: • When neither party has breached, the risk of loss generally passes from seller to buyer when the seller has transported the goods as far as he is obligated to. • When a party has breached, the risk of loss generally lies with that party. www.assignmentpoint.com

17. Seller’s Rights and duties • Seller’s right to cure: seller may cure if time for seller’s performance had not yet passed, seller notifies buyer of intent to cure defect and seller properly repairs or replaces the defective goods within time allowed • Enforcement of the liability of buyer for not taking delivery • Other rights • Damages for non delivery • Remedy for breach of warranty • Repudiation of contract • Interest or special damages Duty of seller is to • deliver the goods of the buyer to accept and pay for them, in accordance with the terms of the contract • seller shall be ready and wiling to give possession of the goods to the buyer in exchange for the price.the seller of goods is not bound to deliver them until the buyer applies for delivery.  • Damages for non delievery • Show specific performance www.assignmentpoint.com

18. Buyer’s Rights and Obligations Perfect tender rule: If the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may: reject the whole, accept the whole, or accept any commercial unit or units or reject the rest • Right to have delivery of goods , • Buyer is not bound to accept the delivery in wrong quantity , or by installment • Buyer has right of inspection before acceptance • Buyer is Not bound to return the reject goods • Right to have the damages because of non delivery • Right to have the remedy for the breach of warranty • Buyer may reject nonconforming goods and withhold payment Buyer’s duty is • to accept conforming goods and pay for them. • to compensate if wrongfully refuse • To apply for the delivery • to meet the seller rights www.assignmentpoint.com

19. Unpaid seller • The seller of goods is deemed to be an "unpaid seller" (a) when the whole of the price has not been paid or tendered;  (b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.  And the term "seller" includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of landing has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price.  Unpaid seller's rights.  • (a) a lien on the goods for the price while he is in possession of them;  • (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them;  • (c) a right of re-sale as limited by this Act.  • (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.  www.assignmentpoint.com

20. Buyer’s Remedies for seller breach: Seller Breaches and Buyer Rejects - The risk remains with the seller until he cures the defect or the buyer accepts the goods. • Seller repudiates before delivery of goods - cancel contract , obtain goods from another supplier ,sue seller • Seller fails to deliver- cancel contract ,obtain goods from another supplier ,sue seller • Seller delivers nonconforming goods, buyer rejects - cancel contract , obtain goods from another supplier , sue seller , sell rejected goods to recover advance payments , if no advance payments, store or reship goods • Seller delivers nonconforming goods, buyer accepts - deduct damages from price , sue seller for damages ,sue for breach of warranty www.assignmentpoint.com

21. Seller’s Remedies for buyer breach( rights of unpaid seller) • Before receiving goods • cancel contract • minimize losses by completing or stopping manufacture • Retain possession • when not sold for credit • if sold on credit but time is expired • when buyer become insolvent , • if price is not paid ( half goods) • Stoppage in transit • resell goods in commercially reasonably manner( perishable and after giving notice to buyer • After receiving goods • If buyer won’t pay, sue for payment & damages, • If buyer wrongfully rejects, sue for payment & damages special damages and interest www.assignmentpoint.com

22. Delivery • Delivery means a voluntary transfer of possession from one person to another Delivery may • be actual • Symbolic- buyer get the means of possesion • Constructive – without any change in visible custody – bill of lading • Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are conformity with the contract.  . when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of  ascertaining whether they are in conformity with the contract.  • Effect of part delivery.  A delivery of partly of goods, in progress of the delivery of the whole, has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole; but a delivery of part of the goods, with an intention of severing it from the whole, does not operate as a delivery of the remainder.  www.assignmentpoint.com

23. Rules regarding delivery • Possession of buyer • By doing anything by which the party agrees • Putting the goods in Possession of buyer or • Any person authorized to hold them on his behalf • Part of delivery is not at all delivery • Application of delivery should made buy the buyer • Place of delivery • Time of delivery • Possession of third person – he must acknowledge the buyer that he hold the good on his behalf • Expenses of delivery shall be borne by the seller • Delivery of wrong quantity – if larger , if fewer, if mixed • Installment delivery – buyer is not bound to accept that • Delivery to the carrier • Examining the goods • Buyer is not bound to return the goods • Liability of buyer for neglecting or refusing delivery of goods www.assignmentpoint.com

24. Unpaid Seller's Lien the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment (a) where the goods have been sold without any stipulation as to credit;  • (b) where the goods have been sold on credit, but the term of credit has expired;  • (c) where the buyer becomes insolvent.  • (2) The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.  Part delivery.  Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstance as to show an agreement to waive the lien.  Termination of lien.  (1) The unpaid seller of goods loses his lien thereon -  • (a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;  • (b) when the buyer or his agent lawfully obtains possession of the goods;  • (c) by waiver thereof.  • (2) 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. www.assignmentpoint.com

25. Document of Title To Goods" • includes a bill of lading, dock- warrant, warehouse keeper's certificate, wharfingers' certificate,  railway receipt, warrant or order for the delivery of goods and any  other document used in ordinary course of business as proof of the  possession or control of goods, or authorising or purporting to   authorise, either by endorsement or by delivery, the possessor of the  document to transfer or receive goods thereby represented;  www.assignmentpoint.com