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DR.

RAM MANOHAR LOHIA NATIONAL LAW UNIVERSITY,

LUCKNOW.

2015 - 2016

LAW OF CONTRACTS II

Topic: What are the legal incidents of sale and agreements to sell. Judicial

pronouncment.

Submitted to: Submitted by:

Dr. visalakshi vegesna Lokesh Nigam

Assistant officer Roll no. 74

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RMLNLU Semester III, Section A

ACKNOWLEDGEMENT
I would take great pleasure in thanking my Law of contract professor, Dr. Visalakshi vegesna for
his infallible support all through the course of this project. This endeavor would not have been in
its present shape had he not been there whenever I needed him. she has been a constant source of
support all the while.

Also I would like to extend my sincere thanks to the library staff for always helping me out with
finding excellent books and material almost every time I needed. They too have been a constant
support system in the completion of this project.

Last but surely not the least- I would like to thank my friends for their timely critical analysis of
my work and special feedback, that worked towards the betterment of this work.

-LOKESH NIGAM

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INTRODUCTION
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.

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 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.

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.1

1 Section 4 of the sale of goods act 1930

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CONTENTS

1. Introduction.
2. Contracts of sale how made.
3. Contract of sale and meaning of sale
4. Essential of contracts of sale.
5. Difference between sale agreement to sale.
6. Legal incidents cases reffered.

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CONTRACTS OF SALE HOW MADE.
(1) 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.

(2) Subject to the provisions of any law for the time being in force, a contract of sale may be
made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be
implied from the conduct of the parties.2

CONTRACTS OF SALE AND MEANING OF SALE


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.

It is a Contract where the ownership in the Goods is Transfferred by the Seller to the Buyer
Immediately at the Conclusion Contract.

AGREEMENT TO SELL: It is a contract of sale where the transfer of property in Goods is to


take place at a future date or subject to some condition thereafter to be fulfilled.

2 Section 5 of The sale of goods act 1930

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ESSENTIALS OF A CONTRACT OF SALE
There must be at-least Two Parties.
The Subject Matter of the Contract Must be Goods.
Price.
Transfer of Property in Goods.
Absolute or Conditional.
All Other Essentials of a Valid Contract.3

3 http://www.shareyouressays.com/92195/six-essential-characteristics-of-a-contract-
of-sale-of-goods

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DIFFERENCE BASIS SALE AGREEMENT TO SELL
TRANSFER OF PROPERTY- The Property of Goods Passes from the seller to the
Buyer immediately. So the seller is no more owner of the Goods sold. It is an Executed
Contract. The transfer of property of the Goods is to take place at a future time or subject
to certain conditions to be fulfilled. It is an executory contract.
TYPE OF GOODS- A sale can only be in-case of existing and specific Goods only. An
Agreement to sell is mostly in-case of future and contingent goods. Although it may refer
to uncertain existing goods.
RISK OF LOSS- In a Sale, If the Goods Are Destroyed, the loss falls on the buyer even
though the goods are in the possession of the seller. In an agreement to sell, if the goods
are destroyed, the loss falls on the seller even though the goods are in the possession of
the buyer.
CONSEQUENCES OF THE BREACH- In a sale, if the buyer fails to pay the price of
goods or if there is a breach in the contract, the seller can sue for the price even though
the goods are still in his possession. If there is a breach of contract by the buyer, the seller
can only sue for the damages and not for the price.
RIGHT TO RE-SELL- The seller cannot resell the goods. The buyer who takes the
goods for consideration and without notice of the prior agreement gets him a good title.
The original buyer can only sue he seller for damages
GENERAL AND PARTICULAR PROPERTY- The sale of contract plus conveyance,
creates Jus in Rem, ie: Give right to the buyer to enjoy the goods as against the word
and large including the seller. An agreement to sell is merely a contract, pure and simple
and creates jus in personam,ie: Gives a right to the buyer against the seller to sue for
the damages.
INSOLVENCY OF THE BUYER- In a sale, if the buyer becomes insolvent before he
pays for goods, the seller in the absence of the lien over the goods, must return them to
the official receiver or assignee. He can only claim the reteable dividend for the price of
the goods. If the buyer becomes insolvent, and has not yet paid the price, the seller is not
bound to part with the goods until he is paid for.
INSOLVENCY OF THE SELLER- If the seller becomes insolvent, the buyer being the
owner is entitled to recover the goods from the official receiver of the assignee. If the

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buyer who has paid the price, finds that the seller has become insolvent, he can only
claim a reteable dividend and not the goods because property in them has not yet.

LEGAL INCIDENTS CASES REFFERED

Cehave N.V. v. Bremer Handelsgesellschaft mbH; the Hansa Nord


[1976] Q.B. 44.

SUMMARY OF THE FACT- A written contract to sell fruit pellets contained the express
stipulation, shipment to be made in good condition. In fact, some of the pellets were not in
good condition when shipped. However, they were, on arrival, still fit to be used for the purpose
the buyer had intended and although they were worth less than they should have been, they could
still have been re- sold at a reduced price.

ISSUE-

Whether there is a breach of condition?


Whether the buyer is entitled to repudiate the contract and reject the goods?

DECISION-

It was held that there was no breach of condition and the buyer was not entitled to repudiate the
contract and to reject the goods. But the buyer is entitled to damages.

Reasoning: The sellers were not in breach of the implied conditions as to fitness for purpose and
merchantable quality. The express stipulation in the contract was not a condition and the sellers
breach of it had not been serious enough to go to the root of the contract. Therefore the buyers
were entitled only to damages.4

4 http://casebrief.me/casebriefs/cehave-v-bremer/

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Rowland v. Divall [1923] 2 K.B. 500.

Summary of the fact- Rowland bought a motor-car from Divall and used it for four months.
Divall had no title to the car, and consequently Rowland had to surrender it to the true owner.
Rowland sued to recover the total purchase price he had paid to Divall.

ISSUE-

Whether there is a breach of condition?


Whether the buyer is entitled to recover the total purchase price?

DECISION-

It was held that there is a breach of implied condition as to title by the seller and therefore the
buyer is entitled to recover the purchase price in full, notwithstanding that he used the car for
four months.

Reasoning: There was a breach of condition. Consequently the buyer can repudiate the contract
and reject the goods. But in this case the car was already taken by the real owner; hence no
question of rejection of goods arises. Therefore, the buyer can repudiate the contract by taking
back the full purchase money as damages due to the breach of condition. The consideration had
totally failed on the part of the seller. The use of the car that he had had was no part of the
consideration that he had contracted for, which was the property in and lawful possession of the
car, whereas what he got was an unlawful which exposed him to the risk of an action at the suit
of the true owner.5

Beale v. Taylor [1967] 1 W.L.R. 1193.

5 http://www.e-lawresources.co.uk/Rowland-v-Divall.php

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Summary of the fact- A buyer responded to an advertisement describing a car for sale as a
1961 model. He inspected the car before buying it. After buying it he discovered that the car
was not unroadworthy.

ISSUE-

Whether consisted of half a 1961 model and half of an earlier car.there was a breach of
implied condition as to description?
Whether the buyer was entitled to reject the car.

DECISION-

It was held that the seller was liable for breach of condition as to description and the buyer is
entitled to reject the goods thereby.

Reasoning: The buyer had relied at least to some extent on the description of the goods which
becomes a condition. Therefore dissimilarity with the description of the delivered goods caused
the breach of such condition.6

Nichol v. Godts (1854) 10 Ex. 191

6 https://www.coursehero.com/file/p11i5j/Beale-v-Taylor-1967-1-WLR-1193-Court-of-
Appeal-Seller-advertised-a-car-for-sale/

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Summary of the fact- Nichol agreed to sell to Godts some oil described as foreign refined rape
oil, warranted only equal to sample. Nichol delivered oil equal to the quality of the samples, but
which was not foreign refined rape oil.

ISSUE-

.Whether a breach of condition has occurred?


Whether the buyer is entitled to refuse the goods?

DECISION-

It was held that breach of condition occurred and Godts could refuse to accept the goods.
Reasoning: Where there is a sale of goods by sample as well as by description, the goods must
correspond with the description as well as sample. Here the goods corresponded with the sample
but not with the description.7

Re Moore & Co. v. Landauer & Co. [1921] 2 K.B. 519

7 http://ahsanlaw.blogspot.in/2012/01/case-laws-on-sales-of-goods-act-1930.html

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Summary of the fact- Moore sold to Landauer 3,100 cases of Australian canned fruits, the cases
to contain 30 tins each. Moore delivered the total quantity, but about half the cases contained 24
tins, and the remainder 30 tins. Landauer rejected the goods. There was no difference in market
value between goods packed 24 tins and goods packed 30 tins to the case.

ISSUE-

Whether a breach of condition has occurred?


whether the buyer is entitled to reject the goods?

DECISION-

It was held that Landauer could reject the whole goods as there was a breach of condition.
Reasoning: As the goods delivered did not correspond with the description of those ordered.8

Brown (B.S.) & Son Ltd. V. Craiks Ltd. [1970] 1 W.L.R. 752

8 http://www.e-lawresources.co.uk/Re-Moore--and--Landauer.php

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Summary of the fact- The buyer of industrial fabric found that it was unsuitable for making
into dresses but that it was suitable for other industrial purposes; as such it was commercially
saleable, though at a slightly reduced price.

ISSUE-

Whether the goods were of merchantable quality?

DECISION-

It was held that the goods were of merchantable quality.

Reasoning: The goods could be used for some other purposes and it had commercial value.
Therefore it meets the demand of merchantable quality. If the goods supplied are useless for any
purpose for which goods of that description are usually used then they are probably not of
merchantable quality. On the other hand, if they are still suitable for some of the purposes for
which goods of that description are usually used and could be re-sold for the same or very nearly
the same price as if they were suitable for every purpose, they will remain of merchantable
quality.9

CONCLUSION
9 http://swarb.co.uk/bs-brown-son-ltd-v-craiks-ltd-hl-3-mar-1970/

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A contract is a legally enforceable agreement between two or more parties with mutual
obligations. The Indian contract Act 1872, Section 2(h) defines the term contract as an agreement
legally enforceable by law, for the formation of a contract there must be an agreement, the
agreement should be enforceable by law.

1. There must be a "lawful offer" and a "lawful acceptance" of the offer, thus resulting in an
agreement.

But there is some differences in sale of goods act. It is known to everyone that for a contract
there must be two parties. In sale of goods act 1930, one party is buyer and other seller. When
seller wants to sell something he/she describe the such true things about the product or he/she
advertise something, afterwards if buyer founds anything towards wrong on that product then
there is a breach of condition which seller prescribe. So buyer have a right to reject the goods
and seller have to take back the goods.

BIBLIOGRAPHY
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Sale of goods act 1930.
Indian Contract Act by Venkatesh Iyer.
www.manupatra.com.
Indian kanoon.in.

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