The ‘Unpaid Seller’ is the most sought after person by the

lawyers

Presented by Liana Deboo (18)Vinka Garg (21)Shray Jain (26) Deven Rao (41) Priyen Sangoi (42) Namrata Shah (50) Shashi Tikiani (55)(18)

Focus Areas

Sale of goods

Conditions and Warranties

Transfer of Property

Performance of Contract

Rights of an Unpaid Seller

Sale of Goods

A seller transfers or agrees to transfer the property in goods to the buyer for a price

Special features Conditions and Warranties When does ownership get transferred

from seller to buyer Unpaid seller Remedies of the buyer if goods are not

delivered

Essentials of a contract of sale

Two parties (buyer and seller) Goods(movable) Price Transfer of general property Essential elements of a valid contract

Goods & Price

Classification of goods› Existing goods, future goods, specific goods,

unascertained goods Effect of destruction of goods

› Goods perishing before making a contract› Goods perishing after agreement of sale but before

sale is affected Price

› Ascertainment of price (fixed, left to be fixed, determined by course of dealing)

› Agreement to select valuation (3rd party fixing the price)

Sale v/s Agreement to sell

Sale Agreement to sellTransfer of property Executed Executory

Type of goods Existing and specific Future and contingent goods

Risk of loss On buyer On seller

Consequences of breach

Seller can sue the buyer

Seller can sue only for damages, not for price

General & particular property

Buyer’s right to enjoy the goods

Buyer’s right to sue seller for damages

Insolvency of buyer Buyer to return to official receiver/ assignee

Buyer not bound to part with goods until paid for

Insolvency of seller Buyer to recover from official receiver/ assignee

Buyer can only claim a rateable dividend

Other concepts

• Hire purchase agreement• Barter or Exchange• Bailment• Contract for work and material• Documents of title to goods• Earnest• Stipulations as to time

Conditions and Warranties

CONDITION

A condition is a stipulation which is essential to the main purpose of the contract

If there is a breach of a condition, the aggrieved party can repudiate the contract of sale

A breach of a condition may be treated as a breach of a warranty. This would happen when the aggrieved party is contented with damages only

WARRANTY

A warranty is a stipulation which is collateral to the main purpose of the contract

In case of a breach of a warranty, the aggrieved party can claim damages only

A breach of a warranty cannot be treated as the breach of a condition

When can a condition be treated as a warranty??

Voluntary waiver of condition Where a contract of sale is subject to any condition to

be fulfilled by the seller, the buyer may (a) Waive the sale or(b) Elect to treat the breach of condition as a breach of

warranty Acceptance of goods by buyer When 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 a term in the contract to the contrary

Express and Implied Conditions and Warranties

Express conditions and warranties are those which are expressly provided in the contract

Implied conditions and warranties are those which the law implies into the contract unless the parties stipulate to the contrary

Implied Conditions

1. Condition as to titleThere is an implied condition on the part of the seller that (a) In the case of a sale, he has a right to sell the goods, and(b) In the case of an agreement to sell, he will have a right to

sell the goods at the time when the property is to pass

2. Sale by Description Sale of goods by description includes the following situations:(a) When the buyer has not seen the goods, and relies on the

description given by the seller(b) When the buyer has seen the goods, but he relies not on

what is seen but on what is stated to him and the deviation of the goods from the description is not apparent

(c) Packing of goods may sometimes be a part of the description

3. Condition as to quality or fitness

The buyer must examine the goods thoroughly before he buys them in order to satisfy himself that the goods will be suitable for its purpose

However,(a) Where the buyer, makes known to the seller the particular

purpose for which he needs the goods and depends upon his skill and judgment, there is an implied condition that the goods shall be reasonably fit for that purpose

(b) If the buyer purchases an article and is suffering from an abnormality and it is not made known to the seller, it does not apply

(c) If a buyer purchases an article under patent, the implied condition does not apply, unless the buyer relies on the seller’s skill and makes known to the seller that he so relies on him

(d) In case the goods can be used for a number of purposes, the buyer must tell the seller the particular purpose for which he requires the goods.

4. Condition as to Merchantability

Where goods are bought by description from a seller who deals in goods of that description ,there is an implied condition that the goods are of merchantable quality

Merchantable quality implies that goods are commercially saleable under that description by which they are known in the market at full value.

5. Condition implied by Custom

An implied condition as to quality or fitness for a particular purpose may be annexed by the usage of trade

6. Sale by Sample In case of a contract for sale by sample, there is an implied

condition –(a)That the bulk shall correspond with the sample in quality,(b)That the buyer shall have a reasonable opportunity of

comparing the bulk with the sample(c)That the goods shall be free from any defect. (applies to latent defects only)

7. Condition as to Wholesomeness In the case of eatables and provisions, in addition to the

implied condition as to merchantability, there is another implied condition that the goods shall be wholesome

Implied Warranties

Warranty of quiet possession In a contract of sale, there is an implied warranty

that the buyer shall have and enjoy quiet possession of the goods

Warranty of freedom from encumbrance The buyer is entitled that the goods are not

subject to any charge or right in favour of a third party.

Warranty as to quality or fitness by usage of trade Warranty to disclose dangerous nature of goods

CAVEAT EMPTOR

Meaning “Let the Buyer Beware”

Exceptions Fitness for buyer’s purpose Sale under a patent or trade name Merchantable quality Usage of trade Consent by fraud

Transfer of PropertyProperty, Possession And Risk

Property, Possession And Risk

3 Stages in performance of a contract of sale of goods by a seller

1. Transfer of property in the goods 2. Transfer of possession of the goods 3. Passing of the RISK.

Importance of time at which property in goods passes from seller to the buyer

1. Risk follows ownership2. Action against third parties3. Insolvency of the seller or the buyer4. Suit for price

Passing the Property

Rules for ascertaining when property in goods passes to the buyer

1. Goods must be ascertained 2. Intention of the parties

Passing the Property

Rules when the intention of the parties is unascertainable as to when the property of goods to be transferred to the buyer

1. Specific Goods (i)Passing of property at the time of contract (ii)Passing of property delayed beyond date

of contract * Goods not in deliverable state * Price of goods to be ascertained by

weight

Passing the Property

2. Unascertained goods Pre conditions for transfer of propertya. Ascertainment of goodsb. Appropriation to the contract

3. Goods sent on approval or `on sale or return’The property passes to the buyer when:c. Buyer signifies approval to sellerd. Does an act adopting transactione. Keeps the goods for the fix time or reasonable

time

Sale By Non owners

“No one can give that which one has not got”

Exceptions

1.Sale by a person not the owner2.Sale by a mercantile agent3.Sale by one of several joint owners4.Sale by person in possession under a voidable contract5.Sale by seller in possession after sale6.Sale by buyer in possession having bought or agreed to

buy7.Sale by an unpaid seller8.Exception in other Acts

Performance of contract

Delivery of goods

Delivery means voluntary transfer of possession of goods from one person to another

3 Types in which goods can be delivered

a)Actual Delivery

b)Symbolic Delivery

c)Constructive Delivery or Delivery by Attornment

Rules as to Delivery of goods

1. Mode of delivery2. Deliver & Payment-concurrent

conditions3. Effect of part delivery4. Buyer to apply for delivery5. Place of Delivery6. Time of delivery7. Goods in possession of a third party8. Cost of delivery

9. Delivery of wrong quantitya) Delivery of goods less than contracted

forb) Delivery of goods more than

contracted forc) Delivery of goods contracted for mixed

with other goods10. Instalment deliveries11. Delivery to a carrier or wharfinger

Rules as to Delivery of goods

Acceptance of delivery

The buyer is deemed to have accepted the goods-

When he intimates the seller that he has accepted the goods

When the goods have been delivered to him and he does any act to them which is inconsistent with ownership of seller such as re-sell, use or alteration

When, after the lapse of reasonable time, he retains the goods without intimating the seller that he has rejected them

Buyer’s liability for rejection, neglecting or refusing delivery

In case of rejection ,it is sufficient for the buyer to intimate to the seller the same. If the seller refuses to take away the goods, the buyer becomes the bailee and may charge for keeping them

In case of neglecting or refusing the delivery, the buyer is liable for

a) Any loss occasioned by his neglect or refusalb) A reasonable charge for the care and custody of the goods The seller may sue for price and damages on where the

refusal of the buyer to take delivery amounts to repudiation of contract

Rights of the buyer

1.Right to have delivery as per contract 2. Right to reject the goods 3. Right to repudiate4. Right to notice of insurance5. Right to examine6. Right against the seller for breach of contract

a)Suit for damagesb)Suit for pricec)Suit for specific performanced)Suit for breach of warrantye)Repudiation of contract before due datef) Suit for interest

Duties of the buyer

1. Duty to accept the goods and pay for them in exchange for possession

2. Duty to apply for delivery3. Duty to demand delivery at a reasonable hour4. Duty to accept installment delivery and pay for it5. Duty to take risk in the course of transit6. Duty to intimate the seller where he reject the

goods7. Duty to take delivery8. Duty to pay price9. Duty to pay damages for non-acceptance

RIGHTS OF AN UNPAID SELLER

Who is an unpaid seller?

1. A seller of goods is deemed to be an unpaid seller when:-

2. 1) The whole of the price is not paid/tendered.

3. 2) A bill of exchange or other negotiable instrument has been received as a conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

4. Conditions to be fulfilled before a seller of goods can be deemed to be an unpaid seller:

5. 1) He must be unpaid and price must be due.6. 2) He must have an immediate right of action

for the price7. 3) A bill of exchange or other negotiable

instrument was received but the same has been dishonored.

RIGHTS OF AN UNPAID SELLER AGAINST THE GOODS

RIGHT OF LIEN [ SEC.46(1)(a)&47 TO 49] Available to unpaid seller when :-1) Goods sold without stipulation as to credit2) Goods sold on credit, but term expired3)The buyer becomes insolvent Rules regarding lien :-1)Seller exercises lien as agent 2)Lien depends on actual possession and not on title3)Possession of goods by seller not expressly exclude right

of linen4)Exercised only for price & not other charges5)Exercise right of linen on remainder part of goods Termination of lien :-1)Delivers goods to a carrier, without reserving right of

disposal 2)If buyer lawfully obtains possession of goods 3)Waives his right of linen on goods either expressly or

impliedly

Right of stoppage in transit [sec.46(1)(b)&50-52]

- It is available as :- a) When buyer becomes insolvent. b) When goods are in transit.- Duration of transit (sec. 51) Transit is an intermediate stage, from time they are delivered to a carrier till received by buyer from such carrier.

- Transit comes to end1)If buyer/agent takes delivery of goods before they arrive at

destination2)After arrival carrier acknowledges to buyer 3)Carrier wrongfully refuses to deliver goods to buyer/agent 4)Part delivery of goods done to its buyer

- How stoppage in transit is effected1)By taking actual possession of goods2)By giving notice of his claim to carrier

- Liability of carrier

Distinction between right of lien and right of stoppage in transit

1) Stoppage in transit - when buyer is insolvent Right of lien - when the buyer is able to pay but does not pay.2) Right of lien – on goods in actual possession of the seller Stoppage in transit - goods are in possession of a middleman.3) Right of lien – ends when possession of goods surrendered by

seller Stoppage in transit – ends when goods have left the possession

of seller.4) Right of lien – to retain possession Stoppage in transit - to regain or resume possession.

Right of re-sale The unpaid seller can re-sell the goods : 1) where the goods are of perishable nature 2) when exercised his right of lien or stoppage in transit & given

notice to the buyer of his intension to re-sell the goods and the buyer has not within a reasonable time paid the price.

3) seller expressly reserves a right of re-sale when buyer makes default [sec.54].

Right of withholding deliveryRights of an unpaid seller against the buyer

personally :

1) Suit for price [sec.55]:-a) where the property has passed b) where property has not passed2) Suit for damages for non-acceptance [sec.56]3) Repudiation of contract before due date [sec.60]4) Suit for interest [sec.61(2)(a)]

Remedies for breach of contract of sale

1) Seller’s Suits2) Buyer’s Suits

AUCTION SALES- A sale by auction is a public sale where different intending

buyers try to outbid each other which is finally sold to highest bidder. The auctioneer who sells the goods by auction is an agent of seller. His relationship with owner is governed by general principles of law.

The law on auction sales is in Sec.64 of sale of goods act.

Rules of auction sales1) Goods put up for sale in lots2) Completion of sale3) right of seller to bid4) Sale not notified subject to a right to bid5) Reserve price6) Use of pretended bidding7) Knock out or agreement not to bid against each other

Damping - It is an illicit act dissuading the intending purchaser from bidding,

it is illegal and entitles the auctioneer to withdraw the property from auction.

Thank You