CMA Laws and Ethics Sales Of Good Act 1930 Question and Answers

Sales Of Goods Act 1930

Question 1. Introduction
Answer:

  • It is one of the special types of contract.
  • Initially, it was the part of Indian Contract Act.
  • Later it was deleted and a separate act was passed.
  • The basic provisions and requirements of the contract equally apply to the Sales of Goods Act.
  • It contains and deals with the law relating to the sale of goods and not with mortgage or pledge.
  • It received its assent on 15 March 1930.
  • It came into force in July 1930.
  • It extends to the whole of India except the State of Jammu And Kashmir.

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2. Definition of Various Terms
Answer:

  • Buyer: A person who buys or agrees to buy the goods.
  • Seller: A person who sells or agrees to sell the goods.
  • Goods: As per Sec. 2(7), it means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to the contract of sale.
  • Money means current money and it includes rare and old coins.
  • Actionable claim means that a person cannot make a present use of or enjoy, but can recover it using a suit or an action.
  • Existing Goods: It means such goods that are in existence at the time of the contract of sale i.e. owned or possessed by the seller.
  • Specific Goods: It means goods identified and agreed upon at the time the contract of sale has been made.
  • Ascertained Goods: It means that the goods are identified by the agreement after the contract of sale has been| made.
  • Generic Or Unascertained Goods: It means the goods that are not specifically identified but are indicated by description.
  • Future Goods: As per Sec. 2(6), it means goods to be manufactured! or produced or acquired by the seller after making the contract of sale.
  • Contingent Goods: This means the goods acquired by the seller depend upon a contingency that may or may not happen. Agreement to sell can only be there in respect of future or contingent! goods.
  • Actual sales can take place only for specific goods.
  • Goods are said to be in a deliverable state, when they are in such a condition that the buyer would, under contract, be bound to take delivery of them.
  • Delivery: It means voluntary transfer of possession by one person to another.

Sale Of Goods Act, 1930 Delivery

  • Document of Title of Goods: It includes a bill of lading, dock-warrant, warehouse keeper’s certificate, wharfinger’s certificate, or any other document used in the ordinary course of business as proof ’of the possession or control of goods or authorizing or purporting to authorize either by endorsement or delivery, the possessor of the document to| transfer or receive goods thereby represented.
  • Property: It means the general property and not merely a special property.
  • Insolvent: A person is said to be insolvent when he ceases to pay his| debts in the ordinary course of business.

Question 3. Contract of Sale
Answer:

In this ownership is transferred immediately to the buyer even though possession of goods is with the seller.

As per Section 4(1) of the Sale of Goods Act, 1930, “Contract of sale of Goods is a contract whereby the seller transfers or agrees to transfers the property in goods to the buyer for a price”.

Question 4. Essential Elements
Answer:

  • There must be at least two parties. (Bilateral Contracts)
  • The subject matter of the contract must be goods.
  • A price in money should be paid or promised.
  • A property transfer of goods from the seller to the buyer must occur.
  • It must be absolute or conditional.
  • All other essentials of a valid contract must be present.

Question 5. Sale
Answer: As per Section 4(3) of the Act, “Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale”.

Question 6. Agreement to Sell
Answer:

As per Section 4 (3) of the Act, “Where under a contract of sale 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 an agreement to sell’’.

Question 7. Formalities of Contract of Sale
Answer:

  • There may be immediate delivery of goods
  • There may be immediate payment of the price, but it may be agreed that the delivery will be made at some future date.
  • There may be immediate delivery of the goods and an immediate price payment.
  • It may be agreed that the delivery or payment or both are to be made in installments.
  • It may be agreed that the delivery or payment or both are to be made at some future date.

Question 8. Subject Matter of Sale
Answer:

  • As per Sec. 6
  • Subject matter must always be goods which may be existing or future goods.
  • Contract can also be made about the goods, the acquisition of which by the seller depends upon a contingency, which may or may not happen. Such contracts are contingent contracts.
  • When the seller purports by his contract to effect a sale of future goods, the contract will operate only as an agreement to sell the goods and not as a sale.

Question 9. Destruction of Subject Matter of Sale
Answer:

Goods Perishing before Making a Contract (Sec. 7):

  • The contract is void ab initio.
  • If the seller enters into the contract even on being aware of the destruction, he is estopped from disputing the contract.
  • It also includes the goods that have lost their commercial value.

Goods Perishing after Agreement to Sell (Sec. 8):

  • The agreement becomes void.
  • Provided the risk has not passed to the buyer.
  • It applies only to the sale of specific goods.

Question 10. Price
Answer:

  • Price means monetary consideration for the sale of goods.
  • Maybe money paid or promised to be paid.
  • No sale can take place without a price.

Question 11. Ascertainment Of Price.
Answer:

As per Sec. 9

  • Price may be:
    1. Fixed by a contract.
    2. Agreed to be fixed in a manner provided by the contract, or
    3. Determined by the course of dealings between the parties.
  • When it cannot be fixed in any of the above ways, the buyer is bound to pay a reasonable price to the seller.
  • Generally Market Price would be Reasonable. Price:

As per Sec. 10

  • Price is to be determined by a third party.
  • Where there is an agreement to sell goods on the terms that the price is to be fixed by a third party, and he either does not or cannot make such a valuation, the agreement will be void.
  • If the third party is prevented by the default of either party from fixing the price, the party at fault will be liable for the damages to the other party who is not at fault.

Question 12. stipulation
Answer:

  • Before concluding a contract of sale, certain statements are made by the contracting parties.
  • The statement may be a stipulation by the seller on the reliance on which the buyer makes the contract.
  • The statement may not be a stipulation if it is a mere recommendation by the seller thus, does not give rise to any action.
  • A stipulation or a representation in a contract of sale concerning goods which are the subject thereof may be a condition or warranty.”

Question 13. Warranty.
Answer:

  • A warranty is a stipulation collateral to the main purpose of contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated.”

As per Sec.11

  • Stipulation as to the time of payment is not the condition unless such an intention appears in the contract.

Question 14. Circumstances when Condition may be Deemed as Warranty
Answer:

  • Where the buyer waives the performance of the condition altogether, the party may for his benefit, waive a stipulation.
  • Where the buyer himself opts to treat the breach of condition as a warranty.
  • Where the contract is non-severable and the buyer has accepted either the whole goods or any part thereof.
  • Where the fulfillment of any condition or warranty is excused by law because of impossibility or Otherwise

Question 15. Types of Conditions
Answer:

Express Condition:

  • Condition is expressed when the terms of the contract expressly state them.
  • They are agreed upon between the parties at the time of the contract and are expressly provided in the contract.
  • It does not negativate an implied condition.

Implied Condition:

  • Condition is implied when the terms are not expressly provided for.
  • They are presumed by law to be present in the contract.
  • They may be neglected or waived by an express agreement.

It Includes:

  • Condition as to title.
  • Condition as to sale by description.
  • Condition as to sale by sample as well as description.
  • Condition as to quality and fitness.
  • Condition as to merchantability.
  • Condition as to sale by sample.
  • Condition as to wholesomeness.

Question 16. Condition as to title [Sec. 14(a)]
Answer:

  • It presumes that the seller has a valid title to the goods.
  • The seller has a right to sell the goods in case of sale.
  • In case of an agreement to sell, he will have the right to sell the goods at the time when the property is to pass unless there is a contract to the contrary.
  • If the seller’s title turns out to be defective, the buyer may return the goods to the true owner and recover the price from the seller.

Question 17. Condition as to Sale by Description (Sec. 15)
Answer:

  • Here, the implied condition is that the goods must correspond with the description.
  • The buyer is not bound to accept and pay for goods that are not by the description of the goods.
  • The buyer relies for his information on the description of the goods given by the seller.

18. Condition as to Sale by Sample as well as Description (Sec. 15)
Answer: Here, the implied condition is that the bulk of goods supplied must correspond with both the sample and the description.

Question 19. Condition as to Quality and Fitness [Sec. 16(1)]
Answer:

Here the implied condition operates on the fulfillment of the following conditions:

  • The buyer requires the goods for a particular purpose which he has made known to the seller.
  • The buyer relies on the skill and judgment of the seller.
  • The seller sells such types of goods.
  • If the goods are bought under a patent or trade name, there is no such condition.

Question 20. Condition as to Merchantability [Sec. 16 (2)]
Answer:

  • It means that when the goods are bought by description from a seller who deals in such goods, it is implied that the goods will be of merchantable quality.
  • It is immaterial, whether the seller is a manufacturer or producer or not.
  • It does not operate where the buyer examines the goods before the sale and examination ought to have revealed the defects.

21. Condition as to Wholesomeness
Answer: In the case of eatables and other provisions, there is an implied condition of wholesomeness i.e. fit for consumption, other than merchantability.

Question 22. Condition as to Sale by Sample (Sac. 17)
Answer:

There is an implied condition that:

  • The bulk shall correspond with the sample in quality,
  • The buyer shall have a reasonable opportunity to compare the bulk with the sample.
  • The goods shall be free from any defect rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample.

Question 23. Doctrine of Caveat Emptor
Answer:

  • It means, let the buyer beware’ i.e. buyer purchases the goods at his risk.
  • When the seller displays the goods in the open market, it is for the buyers to make a proper selection of goods.
  • If the goods turn out to be defective, he cannot hold the seller liable.

As per Sce. 16,

Subject to the provisions. of this Act or any other law for the time being tightness or any particular purpose of, goods supplied under a contract of sale”.

Question 24. Transfer of Title by Non-Owner
Answer:

Sec. 27:

  • The general rule is where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than that the seller had.”
  • This rule is expressed in the Latin maxim “Nemo dat quod nonhabit” which means that no one can give what he has not got no one can! pass a better title than he has
  • Even a bonafide buyer gets no valid title.

Exceptions to the above rule:

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

Question 25. Mode of Delivery
Answer:

  • Actual Or Physical: Goods are physically handed over to the buyer or his authorized agent
  • Constructive: Possession of goods is changed without any actual change in their custody
  • Symbolic: Goods are not delivered physically but some symbol carrying real possession or control is handed over.

Question 26. Unpaid Seller
Answer:

  • As per Sec. 45,

Seller Is deemed to be an unpaid collar, 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 v/as an absolute and not a conditional payment.

Rights of Unpaid Seller Against Goods:

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

Question 27. Auction Sales (Sec. 64)
Answer:

  • It Is a model 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.
  • The following rules apply
    1. When goods are put up for sale in lots, each lot is treated to be the subject of a separate contract of sale.
    2. Salo is complete when the auctioneer announces its completion by the fall of Hamrnor 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. Salo may be notified to be subject to a reserve or upset price.
    6. If the collar makes use of protended bidding to raise the price, the sale is voidable at the buyer’s option.

Sales Of Good Act 1930 Short Note Question And Answers

Question 1. Write a short note on Future Goods
Answer:

Future Goods:

  • According to the Sale of Goods Act, It is an implied condition of sale that only owns or can sell the goods.
  • It is expressed in the Latin phrase’ Memo dat quod non habit.’ which means that “none can give who does not himself possess.”
  • There is one exception to this rule in the case of future goods,
  • Future goods mean goods to be manufactured produced or acquired by the seller after the making of the contract of sale.
  • As a rule, any person may sell or offer for sale goods of which he is not the owner at present, but which he expects to acquire in due course of time.
  • A contract to sell oil not yet extracted from the refineries of him or not yet obtained from the pressing of seeds in his possession is a contract for the sale of future goods.
  • Any contract for the present sale of future goods constitutes an agreement to sell.

Specific Goods:

  • These are the goods that are specifically identified and agreed upon at the time when the contract of sale is drawn and executed.
  • The goods must be identified and separated from the other goods at the time when the contract of sale is made.
  • Merely an identification of goods does not make them specific goods.
  • For example, in the case of the sale of one horse out of a lot of 25 horses, goods shall be specific if the horse is selected before the contract of sale is made.
  • Here it is important to note that all horses are horses but they cannot be exactly similar to each other.
  • Therefore, it is imperative to select the horse out of the lot as specific goods.

Question 2. Write a short note on the Termination of the lien of unpaid Seller.
Answer:

Termination of Lien: Lien has not been specified in the question. It is taken „ as the lien of unpaid seller.

The unpaid seller loses his lien on the following conditions :

  • when he agrees to terminate or waive his lien for example when he extends the period of credit;
  • When the buyer or his agent lawfully obtains possession of goods
  • when the seller unconditionally delivers the goods as per directions of the buyer. It should be noted that if the seller has obtained a decree for the price of goods, it does not mean that his lien is lost.

Question 3. Write a short note on Damping (Sale of Goods Act)
Answer:

Damping: Some bidders may do something to discourage the other bidders from bidding.

  • Damping is an illegal practice because it is intended to reduce the bidding price.
  • The seller or the auctioneer can withdraw goods from an auction if he smells of damping in the auction sale.

Sales Of Good Act 1930 Descriptive Question And Answers

Question 1. A seller may deliver goods to a carrier with a right of disposal. Comment.
Answer: Yes. the seller may do so. In such case, he does not lose the right of lien u/s 46(1 )(1) of The Sale of Goods Act, 1930, even though the seller has parted with the possession of goods.

Question 2. In an auction sale, a bid once given cannot be withdrawn. Do you agree?
Answer:

  • Any bid once made can be withdrawn at any time before the completion of the auction.
  • When the auction is completed and finished, the final bid which is accepted cannot be withdrawn.

Question 3. A nonowner cannot make a valid Transfer of Goods. Answer with Rule position.
Answer:

  • According to the Sale of Goods Act, It is an implied condition of sale that only the owner can sell the goods.
  • It is expressed in the Latin phrase ‘Nemo dat quod qui nonhabit.’ which means that “none can give who does not himself possess.”
  • There is one exception to this rule in the case of future goods.
  • Future goods means goods to be manufactured produced or acquired by the seller after the making of the contract of sale.
  • As a rule, any person may sell or offer for sale goods of which he is not the owner at present, but which he expects to acquire in due course of time.
  • A contract to sell oil not yet extracted from the refineries owned by him or not yet obtained from pressing seeds in his possession is a contract for the sale of future goods.
  • Any contract for the present sale of future goods constitutes an agreement to sell.

There are many examples, some of which are given below:

  1. Sale by mercantile agent : (mercantile means commercial or trade). The commercial agent of the owner can sell the goods on behalf of the owner though the commercial agent is not the owner of the goods. The buyer gets a valid title on goods purchased from the agent.
  2. Sale by one of the joint owners: The goods can be sold by any of the joint owners provided that the joint owners permit in this regard.
  3. Sale by a seller who has goods after sale.
  4. Sale by unpaid seller, sale by finder of goods, sale by official receiver or liquidator.
  5. Sale by pawnee.

Question 4. Comment on the following based on legal provisions: Parties to a contract of sale can get the price of goods fixed by third parties.
Answer:

Agreement to sell at valuation:

  • Sometimes the goods to be sold are such that either the seller or the buyer is not able to determine and decide its price.
  • In such cases, both parties make a contract that the value of goods will be determined or valued by a third party who is an expert in such field.
  • Thus there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party.
  • The third party should have no interest in the contract except for the fixation of price.
  • If that third party does not fix the price because of any reason of its own, the contract becomes void for the non-fixation of price consideration.
  • If the buyer has taken or used any part of goods or the whole goods, the buyer should pay a reasonable price, what is a reasonable price will depend on the facts and figures of each case.

Question 5. Transfer of Title to goods takes place when it is intended. Whether it is correct?
Answer:

  • It should be noted that the transfer of property in goods is distinct and different from the delivery or possession of goods.
  • The property may pass from the seller to the buyer even without delivery of goods.
  • It is elementary (basic) law of contract that parties may fix the time when the property (ownership) in goods shall be deemed to have passed.
  • It may be at the time of delivery of goods, or it may be at the time of making final payment, or even at the time of making of goods.
  • The seller can sue for price only when the property in goods has passed to the buyer.

Question 6. In the case of auction sales, auctioneers have some implied obligations. State such obligations.
Answer:

  • Yes, obligations are:
  • He. has the authority to sell goods.
  • He warrants that he does not know any defects in the title of the principal.
  • He undertakes to give possession of the goods against the price paid.
  • He guarantees quiet possession of goods by the purchases.

Question 7. A nonowner can convey a better title to the bona fide purchaser of goods for value in certain cases. List out those cases.
Answer:

Sale by person, not the owner:

  • Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by conduct precluded the seller’s authority from denying the seller’s authority to sell.
  • Generally, the owner alone can transfer property in goods “Nemo dat
    quod nonhabit” which means that no one can give what he does not have.
  • It means a nonowner cannot make a valid transfer of property in goods.
  • If the title of the seller is defective, the buyer’s title will also be subject to the same defect.
  • If the seller has no title, the buyer does not acquire any title although he might have acted honestly and might have acquired the goods after due payment.
  • This rule is to protect the real owner of the goods.
  • Though this doctrine seeks to protect the interest of real owners, in the interest of trade and commerce there must be some safeguard available to a person who acquired such goods in good faith for value

Sale Of Goods Act , 1930 Sale by Person not The Owner

Sale Of Goods Act , 1930 Sale by Person not The Owner

Question 8. Under what circumstance breach of condition is treated as a breach of warranty under the provisions of The Sale of Goods Act, 1930?
Answer:

According to Section 13 of the Sale of the Goods Act,1930  A breach of condition may be treated as a breach of warranty

In the following circumstances:

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

Question 9. Abhishek contracts to sell Bhusan, by showing a sample, a certain quantity of tea described as ‘Best quality Darjeeling tea. The tea when delivered matches with the sample, but it is not Darjeeling tea. Referring to the provisions of the Sale of Goods Act, 1930 advise the remedy, if any, available to Bhusan.
Answer:

Sale by sample is described in Sec. 17 of the Sale of Goods Act, of 1930. A contract of sale is a contract for sale by sample where there is a term in the contract Express or implied, to that effect. 

In the case of a contract for sale by sample there is an implied condition-

  • The bulk shall correspond with the sample in quality.
  • They shall have a reasonable opportunity to compare the bulk with the sample.
  • That the goods shall be free from any defect, rendering them un-merchantable, which would not be apparent on a reasonable examination of the goods.
  • In a contract for the sale of the brand by sample, Bhusan is entitled to return the tea and claim a refund of money as there is a breach of condition.

Question 11. State your views on the following: Consideration for the sale of goods must be in terms of money. In an auction sale, a bid once made can not be withdrawn by the bidder.
Answer:

  • Correct: It is one of the essentials of the contract of sale, that price must be paid in terms of money.
  • Incorrect: The bidder can withdraw his bid any time before the fall of the hammer i.e., completion of the sale.

Question 12. What are the consequences of ‘destruction of goods’ under the Sale of Goods Act, 1930, where the goods have been destroyed after the agreement to sell but before the sale is affected?
Answer:

Destruction of Goods-Consequences:

  • As per Section 7, a contract for the sale of specific goods is void if at the time when the contract was made; the goods without the knowledge of the seller, perished or become so damaged as no longer to answer to their description in the contract. The rule is based on the grounds of mutual mistake or impossibility of performance, which is one of the essentials of a valid contract.
  • Section 8 provides that an agreement to sell specific goods becomes void if subsequently the goods, without any fault on the part of the se:’er or buyer, perish or become so damaged as no longer to answer to their description in agreement before the risk passes to the buyer. This rule is also based on the grounds of impossibility of performance as stated above.
  • It may, however, be noted that Sections 7 and 8 apply only to specific goods and not to unascertained goods. If the agreement is to sell a certain quantity of unascertained goods, the perishing of even the whole quantity of such “goods” in the possession of the seller will not relieve him of his obligation to deliver the goods.

Question 13. What do you understand by “Caveat-Emptor” under the Sale of Goods Act, 1S30? What are the exceptions to this rule?
Answer:

  • As per Sec, 16 of the Sale of Goods Act, the buyer is supposed to satisfy himself about the quality of the goods he purchased and is also charged with the responsibility of seeing that the goods suit the purpose for which they were purchased by him.
  • Later on, if the goods do not turn out to be as per his purpose, the seller cannot be asked to compensate him.
  • This is based on the famous doctrine of Caveat Emptor which means ‘let the buyer beware’.

However, there are some exceptions to this which are as under:

  1. Where the buyer, expressly or by implication, makes it known to the seller the particular purpose for which the goods are required, to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall reasonably be fit for such purpose. However, in the case of a contract for the sale of a specified article under its patent or other trade name, there are no implied conditions as to its fitness for any particular purpose.
  2. Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality. However, if the buyer has examined the goods, there shall be no implied conditions as regards defects that such examination ought to have revealed.
    • To apply the implied condition as to merchantability the following requirements must be satisfied.
    • The seller should be a dealer in goods of that description;
    • The buyer must have no opportunity to examine the goods or there must be some latent defect in the goods which would not be apparent on reasonable examination of the same.
  3. It may be noted the term merchantability has not been defined in the Act. As per the English Sale of Goods Act, goods of any kind are merchantable quality if they are as fit for the purpose or purposes for which goods of that kind are commonly brought as it is reasonable to expect having regard to any description applied to them, the price and all other relevant circumstances.
  4. An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. In some cases, the purpose for which the goods are required may be ascertained from the acts and conducts of the parties to the sale or from the nature of the description of the article purchased.
  5. For example, if a hot water bottle is purchased, the purpose for which it is purchased is implied in the thing itself. In such a case the buyer need not tell the seller the purpose for which the bottle is purchased.
  6. Similarly, if a thermometer is purchased in common usage, the purpose of the thermometer is well known, the buyer need not tell the seller.
  7. An express warranty or conditions does not negate a warranty or condition implied by this Act unless inconsistent therewith.

Sales Of Good Act 1930 Practical Question And Answers

Question 1. As per the order, Mr. Malhotra sent some goods to Mr. Paul at Kolkata through Rail. The Station Superintendent of Howrah Station informed Mr. Paul that goods are held at the Station at Paul’s risk and cost. In the meantime, Mr. Paul became insolvent. Mr. Malhotra wants to enforce his right as an unpaid seller Advise.
Answer:

The goods have reached their destination and the seller Malhotra has no right of stoppage in transit as the transit is over at Kolkata. Paul has become insolvent hence he cannot make any payments. Malhotra cannot act as an unpaid seller because the buyer is not capable of making any payment.

Question 2. Ashim Sells 1600 kgs. of wheat out of large quantity lying in his godown forwarded to Bablu. Out of these, Babiu sells 600 kgs. to Chandan (wheat yet to be ascertained). Then Chandan the delivery order signed by Bablu to Ashim who confirmed that wheat would be despatched in due course. Bablu then becomes insolvent. Ashim refused to deliver to Chandan. Advice Chandan based on rules.
Answer:

Ashim can not refuse to deliver 600 kgs. of wheat to Chandan. Sec. 53 of The Sale of Goods Act, 1930 provides that the seller (i.e. Ashim) loses his right of lien if he has assented to the sale to a subsequent buyer. By giving assent to Chandan, Ashim has lost his right of lien.

Question 3. Mr. Batliboi bought 50 kgs. of potato against cash payment from Mr. Joshi under a Contract of Sale but half of the consignment was rotten and Mr. Joshi refused to change the rotten potato nor refund the value. Advise Mr. Batliboi.
Answer:

  • The seller should deliver the potatoes in good condition which he has not done The buyer has the right to ask for good quality and correct quantity of Cotton potatoes. As per the Sale of good Act 1930, the seller should pay for the rotten potatoes
  • The quantity indicates that the foodstuff was not for personal consumption or commercial purposes. Hence Mr. Joshi cannot take the plea of “implied condition of fitness”. The doctrine of ‘Caveat Emptor’ would apply and Mr. Joshi does not have a case.

Question 4. Comment on the following based on legal provision.‘A’ The buyer ordered a patent smoke-consuming furnace by its Patent name for his brewery on ‘B’. The furnace received was however found to be unsuitable for the purpose. Hence seller is responsible.
Answer:

The seller is not responsible because he has supplied the goods as per the orders and specifications of the buyer. If the buyer could not use the goods for his purpose, it is not the failure of the seller. Buyer should have been careful while giving the order for the goods, whether such goods would serve his purpose or not.

Question 5. Mr. Barun tells Mr. Tarun in the presence of Mr. Arun that he is the Agent of Arun who maintains silence instead of denying Barun’s statement. Later on, Barun sells Arun’s Goods to Mr. Tarun. Arun now disputed Barun’s title to the goods, as Barun was not an Agent of Arun. Explain whether Arun is right. 
Answer:

In this case, Arun cannot dispute Tarun’s ownership title to the goods. Sec. 27 of the Sale of Goods Act provides that where the owner by his conduct or omission, leads the buyer to believe that the seller has the right and or authority to sell, he is stopped from denying the fact afterward. The buyer t us gets a better title than the seller. This is a case of sale by estoppels.

Question 6. Comment on the following based on legal provision: Mr. ‘A’ purchased a Refrigerator from Mr. ‘B’ on a “hire purchase agreement” expiring on 31.12.15. Mr. ‘A’ sold on 01.05.13 that Refrigerator to ‘C’ who purchased it against adequate consideration. ‘A’ has the right to give a good title to Mr. C.
Answer:

Under the Hire Purchase Agreement, the ownership passes to the buyer only on payment of the last installment. The hirer under the hire purchase system, has no title to the refrigerator therefore Mr. A cannot give a good title to Mr. C. This is because Mr. C. does not get a better title than Mr. A had.

Question 7.M/s. wholesaler agreed to supply 1000 Pcs. of Cotton Shirt to M/s. Retailer at INR 300 per shirt by 31.05.2013. On 01.02.2013 M/s. The wholesaler informs the Retailer that he is not willing to supply the shirt. the price of the shirt increased to INR 350 each. Examine the right of M/s. Retailer.
Answer:

On 01.02.2013 M/s Wholesaler indicated his unwillingness to supply cotton shirts 300/- per shirt although there is time up to 31.05.2013 for the performance of the contract.

It is therefore called anticipating breach of contract. In such cases M/s. Retailers can claim damages. M/s Wholesaler may treat the contract as subsisting and wait till the date of delivery or he may treat the contract as rescinded and claim damages for breach.

Question 8. Mr. Malhotra sold 1000 kgs. of rice to Mr. Basu who delayed in taking the rice from Mr. Malhotra. In the meantime, Mr. Malhotra sold those rice to Mr. Roy who took the delivery for value & without notice of prior sale. Hence Mr. Roy has no good title of ownership to goods Comment.
Answer:

Where Mr. Malhotra having sold goods continues in possession thereof or documents of title to the goods, the delivery by such seller I e Mr. Malhotra will pass a good title to Mr. Roy, since Mr. Roy acted in good faith and Without notice of the Previous sale by paying the value(Sec 30).

  • Where however Mr. Malhotra keeps the goods as Mr. Basu’s bailee, this section shall not apply (Sec. 30)
  • In these circumstances, Mr. Roy can sue Mr. Malhotra

Question 9. Raman instructed Soman, a transporter, to send a consignment of apples to Mumbai. After covering half a distance, Soman ’ found that the apples would perish before reaching Mumbai. Hence, he sold the same at half the market price. Raman sued against Soman. Will he succeed?
Answer:

Agent’s Authority in an emergency:

  • As per Section 189 of the Indian Contract Act, of 1872.
  • An agent has the authority in an emergency to do all such acts as a man of ordinary prudence (means carefulness, wisdom)would. do to protect his principal from losses which the principal would have done under similar circumstances.
  • A typical case is where the agent handling perishable goods like ‘apples’ can decide the time, date, and place of sale, not necessarily as per instructions of the principal, to protect the principal from losses.
  • Here the agent acts in an emergency and acts as a man of ordinary prudence.
  • In the given case, Soman had acted in an emergency and Raman did not succeed against him.

Question 10. Mr. Z bought a refrigerator from a dealer’s shop. But he did not mention the required purpose, whether it is fit to make ice. After using the same, Mr. Z came to know that the refrigerator was unfit for the purpose. State giving reasons as per the provisions of The Sale of Goods Act, 1930, is the dealer liable to refund the price?
Answer:

As per the Rule of Implied Condition, [Sec. 16 (1)]: There is no implied condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. In other words, the buyer must satisfy himself about the quality as well as the suitability of the goods. This is expressed by the maxim caveat emptor (let the buyer beware). But there is an exception to this rule of Condition as to Quality or Fitness: There is an implied condition that the good shall be reasonably fit for a particular purpose described if the three conditions are satisfied:

  • The particular purpose for which goods are required must have been disclosed (expressly or impliedly) by the buyer to the seller.
  • The buyer must have relied upon the seller’s skill or judgment.
  • The seller’s business must be to sell such goods.
  • This condition cannot be invoked against a casual seller. In the given case, Mr. ‘Z‘ bought a refrigerator from a dealer’s shop.
  • But he did. not mention the required purpose i.e. whether it is fit to make ice.
  • After using the same Mr. ‘Z’ came to know that the refrigerator was unfit for the purpose.
  • The dealer is liable to refund the price because the refrigerator was unfit for the purpose for which it was meant and the buyer was not required to disclose this particular purpose.

Question 11. Makhan, seeing a mobile phone in a showcase of a shop that was marked for sale at $ 2,000, enters the shop, places $ 2,000  on the cash counter, and is told to give him the displayed mobile. The shop owner refused. Can the shop owner refuse to sell the displayed mobile?
Answer:

  • Price quotations and price tags do not amount to an offer but are only an invitation to an offer.
  • Therefore, Makhan’s picking up the mobile with a price tag of 2,000/- amounts to an offer by Makhan to purchase the same at that price.
  • It remains to be accepted by the seller- the salesman at the cash counter of the mobile store, to result in a concluded contract.
  • The salesman has every right to accept or refuse the offer.
  • Thus, Makhan shall have no remedies.

Question 12. Lalit delivered sarees valuing $ 50,000 to Rohit on ‘Sale or Return. Basis’. Rohit further delivered these sarees to Sumit and Sumit to Mohit on the same terms and conditions. Subsequently, these sarees were burnt by fire while in the custody of Mohit. Lalit filed a suit against Mohit for the recovery of the price, concerning provisions of the Sale of Goods Act, 1930, to examine whether Lalit’s suit for the price shall be maintainable.
Answer:

In case of the sale of goods on a ‘sale or return’ basis, the property in goods passes from the seller to the buyer in any of the following circumstances as  per provisions given under Section 24 of the Sale of Goods Act, 1930:

  • When he (the buyer) signifies his approval or acceptance to the seller;
  • Where he does any act adopting the transaction, i.e., sells or pledges the goods to a third party and,
  • Where he retains the goods, without giving notice of rejection, beyond * the time fixed for the return of goods or beyond a reasonable time (where no time is fixed).

Thus, in the given problem, Rohit is deemed to have accepted the sarees by further transaction to Sumit, and Sumit is deemed to have accepted the sarees by further transaction to Mohit.

  • The ownership is thus vested in Sumit till Mohit approves or does any act adopting the transaction.
  • In the meantime, the sarees are burnt from the custody of Mohit, and it is assumed that Mohit has handled the sarees with due care.
  • Hence the loss should fall on Sumit because at present he is the owner and risks being associated with ownership unless otherwise agreed between the parties.

Question 13. RK sells 200 bales of clothes to SK and sends 100 bales by lorry and 100 bales by Railway. SK receives delivery of 100 bales sent by lorry, but before he receives the delivery of the bales sent by railway, he becomes bankrupt. RK being still unpaid, stops the goods in transit. The official receiver, on SK’s insolvency, claims the goods. Decide the case concerning the provisions of the Sale of Goods Act, of 1930.
Answer:

Section 50, of the Sale of Goods Act, states that, subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right to stop them in transit, that is to say, he may resume possession of the goods as long as they are in course of transit and retain them until payment of tender of the price. Hence the major rules applicable would be:

  • The seller must be unpaid
  • He must have parted with the possession of goods
  • The goods must be in transit.
  • The buyer must have become insolvent

Applying the above provisions in the given case, we may conclude that RK being unpaid, can stop the 100 bales of cloth sent by railway as these goods are still in transit and SK has become insolvent.

Question 14. To boost sales, Ms ABC Ltd. sells a new machine to Mr. B on a trial basis for three days with the condition that if Mr. B is not satisfied with the performance of the new machine, he can return the new machine. However, the machine was destroyed in a fire accident at the place of Mr. B before the expiry of three days. Decide whether Mr. B is liable for the loss suffered under the Sale of Goods Act, of 1930.
Answer:

The problem as asked in the question is based on the provisions of the Sale of Goods Act, of 1930 as contained in 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 in the agreement before the risk passes to the buyer, the agreement is thereby avoided.
  • In the given case the subject matter of the contract the new machine was destroyed before the transfer of property from the seller to the buyer. Thus the risk passes only when the ownership is transferred to the buyer.
  • Therefore, in the present case, Mr. B is not liable for the loss suffered due to the fire accident over which B has no control.
  • Thus M/s. ABC Ltd. will have to bear whatever loss that has taken place due to the fire accident.

Question 15. To make uniforms for the employees, Amit bought dark blue colored cloth from Bhagat but did not disclose to the seller the purpose of said purchase. When uniforms were prepared and used by the employees, the clothes were found unfit. However, there was evidence that the cloth was fit for caps, boots, and carriages. lining. Advise Amit whether he is entitled to have any remedy under the Sale of Goods Act, of 1930.
Answer:

As per the provision of Section 16(1) of the Sale of Goods Act, 1930, an implied condition in a contract of sale that an article is fit for a particular purpose only arises when the purpose for which the goods are supplied is known to the seller, the buyer relied on the seller’s skills or judgment and seller deals in the goods in his usual course of business.

  • In this case, the cloth supplied is capable of being applied to a variety of purposes, the buyer should have told the seller the specific purpose for which he required the goods. But he did not do so.
  • Therefore, the implied condition as to the fitness for the purpose does not apply.
  • Hence, the buyer will not succeed in getting any remedy from the seller under the Sale of Goods Act [Jones v. Padgett. 14 Q.B.D. 650].

Question 16. Mahendra made a hire-purchase agreement with Narendra for a car of which Narendra was described as the owner. Mahendra paid four of the twelve monthly installments and then learned that Jitendra claimed to be the owner of the car. He nevertheless paid the balance of the installment and exercised his option to purchase. Jitendra then demanded the car and Mahendra gave it up to him. Mahendra then sued Narendra to recover the full price and Narendra counterclaimed for a reasonable sum as hiring charges for the car during the period it was with Mahendra. Decide.
Answer:

The “Nemo dat quod non-habit’’ rule protects the true owner (Jitendra) and the buyer (Mahendra) who was aware of Narendra’s defective rights after paying the fourth installment, would not get any right or title out of his ineffective hire purchase agreement with Narendra.

  • Because Narendra was neither the owner nor an authorized person to put the car on hire purchase for the same reason, he is not entitled to receive any money under the agreement.
  • However, Mahendra may be asked by Jitendra to pay a reasonable rent for the use of the car and Mahendra can recover the amount paid by him to Narendra.

Question 17. Ram sells 200 bales of cloth to Shyam and sends 100 bales by lorry and 100 bales by Railway. Shyam receives delivery of 100 bales sent by lorry, but before he receives the delivery of the bales sent by railway, he becomes bankrupt. Ram being still unpaid, stops the goods in transit. The official receiver, on Shyam’s insolvency, claims the goods. Decide the case concerning the provisions of the Sale of Goods Act, of 1930.
Answer:

Section 50 of the Sale of Goods Act, states that, subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right to stop them in transit, that is to say, he may resume possession of the goods as long as they are in course of transit and retain them until payment of tender of the price.

Hence the major rules applicable would be:

  • The seller must be unpaid
  • He must have parted with the possession of goods
  • The goods must be in transit
  • The buyer must have become insolvent

Applying the above provisions in the given case, we may conclude that Ram being unpaid, can stop the 100 bales of cloth sent by railway as these goods are still in transit.

Question 18. A delivered some diamonds to B on a sale or return basis. B delivered the diamonds to C and C to D on similar terms. The diamonds were stolen while in the custody of D. Who shall suffer the loss?
Answer:

In this case, B has adopted the transaction by delivering the diamonds to C and thus is liable to pay the price to A. Similarly, C has adopted the transaction by further delivery to D and thus is liable to pay the price to B. As between C and D, the transaction was still of sale or return which was not adopted by D, either expressly or impliedly, and thus the ownership had not passed to D at the time of loss. Therefore, C shall suffer the loss of diamonds.

Question 19. X buys synthetic pearls for a high price thinking that they are natural pearls. The seller though understood X’s intention, kept silent. Examine the remedies X has against the seller as per the Sale of Goods Act, of 1930. (3 marks)
Answer:

X has no remedy against the seller as the doctrine of Caveat Emptor will apply:

  • “Caveat emptor” means “let the buyer beware”, i.e. in the sale of goods the seller is under no duty to reveal unflattering truths about the goods sold.
  • Therefore, when a person buys some goods, he must examine them thoroughly.
  • If the goods turn out to be defective or do not suit his purpose, or if he depends upon his skill and judgment and makes a bad selection, he cannot blame anybody except himself.
  • The rule is enunciated in the opening words of Section 16 of the Sale of Goods Act, 1930 which runs thus, “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”.

Question 20. Ms. Tea Enterprises agreed to supply 2,200 Kgsl of Tea to Ms. Gopal Enterprises at $ 1200/- per Kg. by 30,h April 2018. On 1st March 2018, Ms. Tea Enterprises informed Gopal Enterprises that they were not willing to supply the Tea as the price of Tea increased to $ 1400/- per Kg. Examine the rights of Ms. Gopal Enterprises.
Answer:

In terms of the provisions of Sections 32 and 33 of the Sale of Goods Act, 1930; unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods.

Rights of the Buyer according to the Sale of Goods Act, 1930 include:

  • To have delivery of the goods as per contract. (Sections 31 and 32);
  • To sue the seller for recovery of the price, if already paid, when the seller fails to deliver the goods;
  • To sue the seller for damages if the seller wrongfully neglects or refuses to deliver the goods to the buyer (Sec. 57);
  • To sue the seller for specific performance;
  • To sue the seller for damages for breach of a warranty or breach of a condition treated as a breach of a warranty (Sec. 59);
  • To sue the seller the damages for anticipatory breach of contract (Sec. 60)
  • In the instant case, Ms. Gopal Enterprises can exercise any of the rights discussed above.

Question 21. Himadri sells 400 Kg. of tea to Rahul and sends 200 Kg. by lorry and 200 Kg. by Railway. Rahul receives delivery of 200 Kgs. sent by lorry, but before he receives the delivery of the tea sent by railway, he becomes bankrupt. Himadri being still unpaid, stops the goods in transit. The official receiver, on Rahul’s insolvency, claims the goods. Decide the case concerning the provisions of the Sale of Goods Act, of 1930.
Answer:

Section 50, of the Sale of Goods Act, states that, subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right to stop them in transit, that is to say, he may resume possession of the goods as long as they are in course of transit and retain them until payment of tender of the price.

Stoppage in transit (Sections 50-52):

  • The right of stoppage in transit is the right to stop the goods while they are in transit, resume possession of them, and retain possession until payment or tender of the price.
  • The right to stop goods is available to an unpaid seller
  • when the buyer becomes insolvent; and
  • the goods are in transit.
  • The buyer is insolvent if he has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due. He doesn’t need to be declared insolvent by the court.
  • The goods are in transit from the time they are delivered to a carrier or other bailee like a wharfinger or warehouse keeper for transmission to the buyer and until the buyer takes delivery of them.

The transit comes to an end in the following cases:

  • If the buyer obtains delivery before the arrival of the goods at their destination
  • If, after the arrival of the goods at their destination, the carrier acknowledges to the buyer that he holds the goods on his behalf, even if the further destination of the goods is indicated by the buyer
  • If the carrier wrongfully refuses to deliver the goods to the buyer.
  • Applying the above provisions in the given case, we may conclude that Himadri being unpaid, can stop the 200 Kgs of tea sent by railway as these goods are still in transit and Rahul has become insolvent.

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