QUESTION 1

In every contract of sale, a seller is under an obligation to deliver the goods

sold and buyer is under an obligation to pay the requisite amount set or quid
pro quo i.e something in return, under the contract of sale, by them. This is
known as reciprocal promise as per Section 2(f) of the Indian Contract Act. In
other words, any set of promises made which forms the consideration or part
of the consideration for each other are called reciprocal promises and every
contract of sale of goods consists of reciprocal promises.

In certain cases, when a buyer refuses or fails to pay the requisite amount to

the seller, the seller becomes an unpaid seller and can exercise certain rights
against the buyer. These rights are considered as seller’s remedies in case
there is a breach of contract by the buyer. These remedies can be against:

1. Buyer
2. Goods
According to Section 45(1) of Sale of Goods Act, 1930, the seller is considered
as an unpaid seller when:

a- When the whole price has not been paid and the seller has an immediate
right of action for the price.

b- When Bills of Exchange or other negotiable instrument has been received as

conditional payment, and the pre-requisite condition has not been fulfilled by
reason of the dishonour of the instrument or otherwise. For instance, X sold
some goods to Y for $50 and received a cheque. On presentment, the cheque
was dishonoured by the bank. X is an unpaid seller.

Seller also includes a person who is in a position of a seller i.e agent, consignor
who had himself paid or is responsible for the price.

Rights against buyer

1- Suit for the price

When any goods are passed on to the buyer and the buyer has wrongfully
neglected or refused to pay as per the terms and conditions of the contract,
the seller may sue him as per the Section 55(1) because once the property has
been passed the buyer is bound to pay the price.

2- Suit for damages

In case there is a wrongful refusal on the part of buyer for acceptance of goods
and payment of money, the seller can sue him for damages of non-acceptance
as per Section 56. For calculating the quantum of damages Section 73 and 74
of the Indian Contract Act applies.

3- Suit for interest

As stated under Section 61, where there is a specific agreement between buyer

and seller with regards to interest on the price of goods from the date on
which payment becomes due, the seller may recover interest from a buyer. But
if there were no such agreement the seller may charge interest from the day,
he notifies the buyer.

Rights against seller

1- Damages for non-delivery

Section 57 states that, whenever any seller or refuses to deliver the goods to
the buyer, the buyer may sue for non-delivery of goods. If the buyer has paid
any amount he is entitled to recover it. Quantum of damages is decided
through market forces, contract and market price on the day of the breach is
considered as damages. If the buyer wants to claim that damages he must
prove it in the court of law, otherwise, he cannot get a penny more than
refund i.e the amount he has already paid. Buyer must try to keep the loss at a
minimum by purchasing the goods from other sources instead of waiting for
the market to fluctuate.
2- Suit for specific performance

Acc to Section 58 when goods are specific or ascertained and there is a breach
of contract committed on the part of the seller then the buyer can appeal to
the court of law for specific performance. The seller has to perform the
contract and he does not have any option of retaining the goods by paying
damages. The power of the court to order specific performance is subject to
the provisions of chapter II of Specific Relief Act, 1963.

3- Suit for breach of warranty

As stated under Section 59, the buyer cannot reject the goods solely on the
basis of breach of warranty on the part of the seller or when a buyer is forced
to treat a breach of condition as a breach of warranty. But he may sue the
seller for damages or set up against the seller the breach of the warranty in the
extinction of the price.

4- Suit for anticipatory breach

According to Section 60, the rule of anticipatory breach contract applies,

wherein, if any party repudiates the contract before the date of delivery the
other party can consider the contract as rescinded and can sue for damages of
the breach.

Conclusion
The seller becomes an unpaid seller when either he had not been paid in full or
the buyer has failed to meet the maturity of bills of exchange or any other
negotiable instrument accepted by seller as a condition precedent. Under this
situation, the seller can resell the goods if he had exercised the right of lien or
stoppage in transit, after giving notice to the buyer and the new buyer will
have good title over the goods.

QUESTION 2
Essential Elements in a Contract of Sale

 Two parties: A contract of sale is between two parties, where one party
transfers goods to another party.
 Goods: The subject of the contract must be goods. This is usually the
most important element in a contract of sale because if the goods are
not described precisely, confusion could result.
 Transfer of ownership: Ownership of the goods must be moved from the
seller to the buyer, or there should be an agreement in which the
transfer of ownership is made.
 Price: The buyer in the contract must pay a price for the goods.
 A sales contract is a special type of contract. In order for it to be valid, it
must contain clauses about free consent and the competency of the
signing parties.
 A sale and an agreement to sell are part of a sales contract.
 No formalities. There is no particular form to define a valid contract of
sale. A contract of sale can be made simply by offering and accepting.

QUESTION 3

CONDITION:

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

breach of which gives the right to repudiate the contract and to claim damages.
(Sec 12 (2)).

Say ‘X’ wants to purchase a car from ‘Y’, which can have a mileage of 20 km/lt. ‘Y’
pointing at a particular vehicle says “This car will suit you.” Later ‘X’ buys the car
but finds out later on that this car only has a top mileage of 15 km/ liter. This
amounts to a breach of condition because the seller made the stipulation which
forms the essence of the contract. In this case, the mileage was a stipulation that
was essential to the main purpose of the contract and hence its breach is a breach
of condition.

WARRENTY

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

The breach of warranty gives rise to a claim for damages. However, it does give a
right to reject the goods or treat the contract as repudiated. (Sec 12(3)). Let us
understand this with the help of an example below.

A man buys a particular car, which is warranted to be quite to drive and very
comfortable. It turns out that after some days the car starts to make a very
unpleasant noise every time it is operated. Also sitting inside it is also not very
comfortable.

Thus the buyer’s only remedy is to claim damages. This is not a breach of the
condition but rather a breach of warranty, because the stipulation made by the
seller was only a collateral one.

QUESTION-4

The Transfer of Property Act 1882 came into force on 1 st July 1882. It regulates
the rules relating to the transmission of property between living persons in
harmony with the rules affecting its devolution on death. It also completes the
code of contract law as far as it relates to immovable property. This Act does
not cover the entire dimension of transfer of property, it merely deals with the
transfer of immovable property among living persons.

Rules relating to transfer of property under the Act

1. It is important to draw a line between immovable and movable property.

Only an immovable property and in exceptional cases the movable property can
be legally transferred under the provisions of this Act.

2) To validly transfer a property there are certain requirements to be complied

with to safeguard the properties from future disputes and for evidentiary
value. A property must be transferred by a valid instrument which is executed
by the transferor in writing and is attested and registered. A transfer of
property can be executed without a written instrument where writing is not
expressly necessary under the law. There are some instruments under the Act
which are required to be in writing though they may not be registered like, sale
of immovable property of value of rupees 100 and above, exchange, gift etc.

3)Section 5 of the Act defines Transfer of Property. Transfer of property is an

act by which a living person conveys property in present or future to one or
more living persons or to himself or to himself and one or more living persons.
The term person is not restricted to human beings but include a company,
association of persons and body of individuals. Thus for a valid transfer, there
must be an act of conveyance by living persons. It can be a transfer of an entire
interest in a property or partial interest.

.4) There are different kinds of transfer of property under the Act. Sale is
defined as the transfer of ownership of a property in exchange for a price paid
or promised or part paid, or part promised. Exchange is when two people
mutually transfer the ownership of one thing for the ownership of another
neither thing nor both the things being money only, the transaction is called an
exchange. The third form is a gift, gift means a transfer of certain existing
movable or immovable property made voluntarily and without consideration
by one person to another accepted by the done. Such an acceptance must be
made during the lifetime of the donor and while he is still capable of giving.

Question 5

According to the Sales of Goods Act 1930, the performance of the contract of
sale comes under chapter IV from Section 31 to Section 44 it is described
how the goods are being displaced and how their possession are being
transferred from one person to another voluntarily. There are basically two
parties for the agreement, one is the seller and the other one is the buyer.
The seller sells the goods and the buyer buys the goods.

QUESTION 6

Caveat emptor is a neo-Latin word meaning "let the buyer be vigilant." This is a contract law
concept in many jurisdictions that positions the buyer's duty to perform due diligence before
making a transaction. The concept is widely used in real estate transactions but refers to other
products and services as well.

Over the long run, it turned into an instrument for abuse by the sellers and an adequate
safeguard for the courts also. Let us see an example. A bought a horse from B. A wanted to
enter the horse in a race. Turns out the horse was not capable of running a race on account
of being lame. But A did not inform B of his intentions. So B will not be responsible for the
defects of the horse. The Doctrine of Caveat Emptor will apply.
The onus was hence positioned on the purchasers, to do due constancy even in situations
where data imbalance persevered. The development of this standard to the advanced
guideline of Caveat Venditor occurred through legal talk and with the acknowledgment that
the previous was conflicting with the law of value. Caveat Venditor essentially signifies "let
the seller be aware", which forces a more prominent obligation on the actual sellers for the
merchandise and ventures that they sell. As indicated by this standard, there is a suggested
guarantee existing in every item and the buyer need not perform due perseverance to check
the nature of such items. The onus is currently on the sellers to ensure the buyer settles on
a sensibly educated decision and to make up for imperfect items.