Model Q. & Ans. for Judicial Service Main Exam On The Sale of Goods Act 1930 Q.

1 Define sale and agreement to sale. What are the essential characteristic of a hire purchase transaction? Ans S -4(3) of S.G. Act 1930 Says: 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, but where the transfer of 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. Thus in the case of sale there is a transfer of property in the goods from the seller to the buyer, in the case of an agreement to sell, the transfer takes place at a future time or transfer is subject to some condition to be fulfilled thereafter. S -5 (1) Says 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. Hire Purchase Agreement A hire purchase agreement is a popular modern transaction in which the owner of goods delivers the goods to a person who agrees to pay a certain sum periodically and if he continues to pay the sums regularly, he will become the owner of the goods on the payment of the last installment by which he is said to exercise the option of purchasing the goods. The ownership continues to remain with the owner till the payment of the last installment. If the hirer commits default in payment of any installment, the owner can terminate the agreement and take away the goods. Even if the hirer becomes insolvent, the goods will not vest with the official Assignee, but will have to be delivered to the owner.
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The essential characteristics of a hire purchase transaction can be summed up as: (a) (b) First is the element of bailment. Possession of the goods is handed over to the hire - purchaser, but ownership does not change. Second is the element of option in the hire purchase either to return to goods and put an end to his liability to pay further installments or to pay all installments and become the owner: and Third is the element of sale. This enables the hirer to pay all the installments and convert the transaction into to sale of goods of which, he is already in possession.

(c)

Q. 2 What is condition and warranty. Make distinction between them. Ans S -11 to 17 of the Sale of Goods Act, 1930 deal with conditions and warranty. S -12(1) Says that A stipulation in a contract of sale with reference to goods which are the subject there of may be condition or a warranty. S -12(2) Says 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. S -12(3) Says 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 right to reject the goods and treat the contract as repudiated. Further S -12(4) lays down that Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.

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S.S. Law Academy, Civil & judicial, B-2, B-3-4, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Difference between condition & warranty (1) Where the fulfillment of the main purpose of the contract depends on the fulfillment of the stipulation, the stipulation is a condition and where it is not so, the stipulation is only a warranty. Where there is a breach of condition, the contract may be repudiated and the aggrieved party may refuse to perform his own obligation and either treat the contract as closed, or bring an action for breach of contract. but in case of warranty, the contract cannot be repudiated, but a claim for damages may be filed.

(2)

Q. 3 Discuss the principle of Caveat Emptor with exceptions. Ans The Principle of Caveat Emptor The principle of caveat emptor is based upon the presumption that the buyer is relying on his own skill and judgment, when he affects a purchase. The maxim caveat emptor was explained in Jones Vs Just 1868. It was observed that in the case of sale of goods which may be inspected by the buyer and there is no fraud on the part of seller, the maxim caveat emptor applies, even though the defect which exists in them is latent and not discoverable on examination, at least where the seller is neither the grower nor the manufacturer. The buyer in such a case has the opportunity of exercising his judgment; he may if he chooses require a warranty. In such a case, it is not an implied term of the contract of sale that the goods are of any particular quality or are merchantable. Exceptions: S -16 provides following exception: (1) Fitness for buyers purpose: Vide S -16 (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the sellers skill or judgment and the goods are of a description, which it is in the course of the sellers business, to supply, whether he is the manufacturer or producer or not, there is an implied condition that the goods shall be reasonably fit for such purpose.
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S.S. Law Academy, Civil & judicial, B-2, B-3-4, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose. (2) Merchantable Quality: Vide S -16 (2) Where the 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. Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects, which such examination ought to have revealed. Conditions implied by trade Usage: an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the Usage of trade, which must be certain and uniform. Express terms: S -13 (3) of the Act provides: Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility or otherwise. It is open to the parties to include any express conditions and/or warranties in their contract. but an express warranty or condition does not negative a warranty or condition implied by the Act, unless the express terms are inconsistent with the implied conditions. Q. 4 - Risk prima facie passes with property Explain the statement and state the exceptions, if any. Ans S -26 of S.G. Act Says Unless otherwise agreed, the goods remain at the sellers 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 buyers risk whether delivery has been made or not. Provided that, where the 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.

(3)

(4)

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Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party Illustration: A buys goods of B and property has passed to him but the goods remain in Bs warehouse and the price is unpaid. Before delivery a fire destroys the goods. A must pay B the price as A was the owner. Though risk and property generally go together, the two are not inseparable. Sometimes risk may be in one party and property in another. Secondly risk and property may be separated by a trade custom. Thirdly risk and property may be separated by the agreement of the parties. Fouthly risk and property may be separated by a term of the contract. In Consolidated Coffee Ltd. Vs Coffee Board (1980) 3 SCC 358 one of the terms adopted by the Coffee Board for auction of coffee was that the property in the coffee knocked down to a bidder would not pass until the payment of full price and in the meantime, the goods would remain with the seller but at the risk and responsibility of the buyer. The clause was regarded as valid and effective. Exceptions (1) (2) (3) Where the delivery of goods has been delayed through the fault of either buyer or seller the goods are at the risk of the party in fault. The principle shall not affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party. Where the seller of goods agrees to deliver them at his own risk at a place, other than that where they were sold, the buyer shall nevertheless, take any risk of deterioration in the goods necessarily incidental to the course of transit. However this is subject to contrary agreement between the parties. The parties may provide in the contract that the property shall be at the risk of the buyer, although the same may not have passed to him.
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(4)

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S.S. Law Academy, Civil & judicial, B-2, B-3-4, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Q. 5 Explain the maxim nemo dat quod non habet with its exceptions: Ans Nemo Date Quod Non Habet The general rule is that no man can pass a better title than he himself has is enshrined in the maxim nemo dat quod non habet In section 27, it has been stated that a person buying goods from one who is not owner thereof and who does not sell them with his consent, acquires no better title to the goods than the seller has. In the development of our law, two principles have striven for mastery. The first is the protection of property: no one can give a better title than he himself possess. The second is the protection of commercial transactions. The person who takes in goods faith and for value without notice should get a good title. The first principle held valid for a long time but it has been modified by the common law itself and by state, so as to meet the needs of our time. Exceptions S -27 to 30 of the S.G. Act 1930 contains certain exceptions to the principle that no man can pass a better title than he has. These are: (1) Sale by mercantile agent: Vides -27 A mercantile agent can convey a valid title to goods though he is not the owner thereof, provided the following conditions are satisfied: The person selling must be a mercantile agent. He should be in possession of goods or document of title to goods. The possession of goods or documents of title to goods must be with the consent of the owner. The mercantile agent must sell in the ordinary course of business as mercantile agent. The buyer must act in good faith.
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(a) (b) (c) (d) (e)

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S.S. Law Academy, Civil & judicial, B-2, B-3-4, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

(f) (2)

The buyer should not have had notice that the seller had no authority to sell. Sale by one of joint owners: S -28 stipulates If one of the several joint owners of goods has the sole possession of them by the permission of the coowners, the property or the goods is transferred to any person, who buys them of such joint owner in good faith and has not at the time of the contract of sale, notice that the seller has no authority to sell. Sale by a person in possession under a voidable contract: S -29 states: When the seller of goods has obtained possession thereof under a contact voidable U/S -19 or 19A of I.C. Act 1872 but the contract has not been rescinded at the time of the sale the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the sellers defect of title. The rule enunciated in the above section pre-supposes a contract and will not be applicable, if there is no contract.

(3)

(4)

Seller or buyer in possession after sale: S -30 provides that Where a person, having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or document of title, under any sale, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.

Q. 6 Define the unpaid seller and discuss the rights of unpaid seller. Ans Definition S -45 of the S.G. Act defines unpaid seller as: (1) (a) The seller of goods is deemed to be an unpaid seller within the meaning of this Act When the whole of the price has not been paid or tendered;

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(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. Rights of Unpaid Seller S -46 of the S.G. Act 1930 provides:

(1)

Subject to the provisions of this Act and of any law for the time being in force notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law a lien of the goods for the price while he is in possession of them. in case of insolvency of buyer, a right of stopping the goods in transit after he has parted with the possession of them. a right of re-sale as limited by this Act. Some rights of unpaid seller are:

(a) (b) (c)

(1)

Lien on the goods: Vide S -47 Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them, is entitled to retain possession of them until payment or tender of the price in the following cases, namely: Where the goods have been sold without any stipulation as to credit. Where the goods have been sold on rent, but the term of credit has expired. Where the buyer becomes insolvent. Right of stoppage in transit: Vide S -50 When the buyer of goods becomes insolvent, the unpaid seller who had parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit and may retain them until payment or tender of price. Right of re-sale: Vide S -54 Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in
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(a) (b) (c) (2)

(3)

S.K. Shukla

transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender price, resell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on re-sale. If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale. (4) Suit for price: Vide S -55 Where under the contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglect or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods. Where under a contract of sale, the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in goods has not passed, have not been appropriated to the contract. Q. 7 A agrees to sell B ten bales of Egyptian cotton out of 100 bales lying in his godown. The godown had been destroyed by fire at the time of contract. A is unaware of this fact. Who is to bear the loss? Ans S -7 of the S.G. Act deals with Goods perish ing before making of contract. It says Where there is contract for the sale of specific goods, 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. This rule applies subject to the following conditions: (1) (2) The contract must be for the sale of specific goods. The goods must have perished before the contract is made and without the knowledge of the seller. The principle of S -7 does not apply where the seller had knowledge of destruction of the goods. In that case he must make his contract good or pay
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compensation for its breach, except where the buyer also knows that the goods have perished. This principle also does not apply where the sale is not of specific goods but of generic goods. In the case in hand, the contract is void, since the subject matter of the contract had already been destroyed before the making of the contract and without the knowledge of seller A thus A must bear the loss. Q. 8 X bought a horse for Y for Rs. 5000 from Z stipulating for five days trial. The horse was delivered to X, but before the expiration of these five days, the horse died without any fault on the part of X. Then Z sued X for recovery of Rs. 5000. Decide. Ans S -8 of S.G. Act deals with Goods perishing before the sale, but after agreement to sell. It says: 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. Further S -24 of the Act lays down as under Goods sent on approval or sale or return: When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer (a) (b) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction. If he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time and if no time has been fixed, on the expiration of a reasonable time. In Elphick Vs Barnes (1880) horse was delivered to the defendant on terms that he should try it for eight days and then returns it, if he did not like it. The horse died on the third day without the fault of the defendant. The seller could not recover the price from the defendant, the horse, being still his property when it perished/died.
10 Mo: 9899660723

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S.S. Law Academy, Civil & judicial, B-2, B-3-4, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09

Thus in view of the provision laid down in S -8 & 24 of the Act and in case of Elphick Vs Barnes, Z is not entitled to recover the price of the horse from X, since property in horse had not passed to X before the death of horse. Q. 9 A asked B for a hot water bottle and enquired if it would stand boiling water. B sold to A an American rubber bottle saying it would stand hot stand boiling water. The bottle which was purchased by A for his wife, burst and injured her. A sues B for damages. Will he succeed? Ans The problem in question is based on the provision of law laid down in S 16(1) of the S.G. Act 1930, which provides that Where the buyer, expressly or by implication makes known to the seller, the particular purpose for which the goods are required, so as to show that the buyer relies on the sellers skill or judgment and the goods are of a description, which it is in the course of the sellers business to supply (Whether he is manufacturer or producer or not) there is an implied condition that the goods shall be reasonably fit for such purpose. For this condition to arise, the following condit ions have to be proved: (1) (2) (3) The buyer should make known to the seller, the particular purpose for which the goods are required. The buyer should rely on the sellers skill or judgment. The goods must be of a description which it is in the course of the sellers business to supply. In Priest Vs Cast (1903), the plaintiff, who was a draper and had no special skill or knowledge with regard to hot water bottles, went to a chemist, who sold such articles and asked for a hot water bottle. An article was shown to him as such. He inquired whether it would stand boiling water and defendant told him that it was meant for hot water, but would not stand boiling water. He then purchased it. Some days afterwards, the bottle while in use by plaintiffs wife, burst and she was in consequence scalded. It was held The plaintiff when purchasing the bottle, made known to the defendant the particular purpose for which it was required, so as to show
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that he relied on skill and knowledge of the defendant. The jury had found at the trial that the bottle was not, when sold, fit for the purpose of a hot water bottle. Therefore, the case came U/S -14(1) of the (English) Sale of Goods Act 1893 and there was an implied warranty that the bottle was fit for the purpose of holding hot water, of which there had been a breach. The plaintiff was therefore entitled to damages. Thus in view of provision of S -16(1) of the Sale of Goods Act 1930 and in case of Pries Vs Cast (1903), it can be inferred that A is entitled to recover damages from B. Q. 10- X contracted to sell to Y the stock of firewood for Rs. 8,000. Y allowed X to keep all firewood in Xs premises so long as it is not lifted by him (Y) before making payment. In the meantime fire took place and all firewood was destroyed. X claims amount of Rs. 8000 from Y, Y refuses to pay. X files a suit. Will X succeed. Decide with reasons. Ans The problem in question is based on S -20 of the Sale of Goods Act 1930, which is as under Where there is an unconditional co ntract for the sale of specific goods in a deliverable state, the property in goods passes to buyer, when the contract is made and it is immaterial, whether the time of payment of the price or the time of delivery of the goods or both, is postponed. The basic conditions for this rule to apply are (1) (2) (3) the sale must be that of specific goods. the goods must be in a deliverable state and the contract must be unconditional. In Tarling Vs Baxter Barn & Cress 1827 A on the 4th of January, agreed to sell to B, a stack of hay to be paid on the 4 th of February, the same to be allowed to stand on As premises until 1 st of may. A stipulated that the hay should not be cut until it was paid for. It was held that this was a contract for an immediate sale and not a future sale and that the property in
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hay passed by it immediately to the buyer and that the same having been accidently destroyed by fire, the loss fell upon him. In the present case, there is an immediate sale and not a prospective sale, the goods being specific and in a deliverable state although there is a stipulation that delivery shall be taken by the buyer after making payment. The sale was complete, when the bargain was struck because nothing remained to be done by the vendor as between him and the vendee. The property in the goods passed to the buyer on the date of bargain itself. Thus Y must bear loss and X is entitled to recover the price.

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S.S. Law Academy, Civil & judicial, B-2, B-3-4, Ansal Building (Basement); Dr. Mukherjee Nagar, Delhi-09