Chapter 3

THE CONTRACT OF SALE

PERFORMANCE OF
DELIVERY
of possession from one person to another." Sec. 2(2).
Delivery means a "voluntary transfer "voluntary dispossession in favour
of another."i
Sir Frederick Poilock has defined delivery" as be Actual
possession is to be determined by the parties. Delivery may
The mode of giving
Symbolicor Constructive. themselves are delivered : the goods are physically
I. Actual delivery occurs when the goods
handed over to the seller or to his agent.
Symbolic delivery occurs when the buyer gets the means of obtaining possession. Example:
2. gives the key of the godown to the
Certain specific goods were locked in the godown and the seller
buyer. It transfers possession and gives it actual control of the place.
of the goods without any
3. Constructive delivery occurs when a change in the possession
change in the actuai and visible custody, e.g., the delivery of the bill of lading with which goods
may be obtained. Hurry v. Mangles:?

RULES REGARDING DELIVERY

The Sale of Goods Act lays down the following rules regarding delivery and other matters
concerning the performance of the contract of sale :

1. Possession of Buyer
Delivery of goods sold may be made by doing anything which the parties agree shall be
treated as delivery or which has the effect of putting the goods in the possession of the buyer or of
any person authorised to hold them on his behalf. Sec. 33.

2. Effect of Part Delivery

Adelivery of part of goods, in progress of the delivery of the whole, has the
the purpose of passing the property in such goods, as a delivery of the whole; but a same effect, for
of the goods, with an intention of severing it from the whole, delivery of part
remainder.Sec. 34.
does not operate as a delivery of the

Examples:
(i) Some goods lying at a wharf, were sold and the seller
delivery to the buyer. The buyer weighed the goods and instructed the wharfinger to give
took away a part of them. There
is deliveryof the whole. If the part
buyer. Hammond v. Anderson 3 remaining on the wharf is lost the loss will fall on the
(i) X sold 5 bales of certain
goods to Y. Y
accept the others. The amounts to part received and paid for one bale and refused to
delivery. Mitchell Reid Co. Buldeo Doss.
v.
L. Pollock and Mulla, Sale of GoodsAct, p. 7 3.8 RR 763
2. (1808) I Camp. 452 4. (1888) 15 Cal I
168
 169
PERFORMANCE OF THE CONTRACT OF SALE

3,Application for Delivery deliver them until the

Apart from any express contract the seller of goods is not bound to
for delivery.Sec. 35.
buyer applies
Delivery
4. Place of it is for the buyer to take possession of the goods or for the seller to send them to the
Whether implied, between the parties.
question depending in cach case on the contract, express or are at the
buyer is a delivered at the place at which they
goods sold are to be
Apart from any such contract, sold to be delivered at the place at which they are at the
time of the sale, and goods agreed to be they are
agreement to sell, or if not then in existence, at the place at which
time of the
manufactured or produced.-Sec. 36(1).

5. Time of Delivery contract of sale the

buyer but no
seller is bound to send the goods to the time.-Sec.
(1) Where under the reasonable
them is fixed, the seller is bound to send them within a
time for sending
36(2). be treated as ineffectual unless made at a reasonable
delivery may
(2) Demand or tender of 36(4).
What is a reasonable hour is a question of fact.Sec.
hour.

6. Possession of a Third
Person
possession of a third person, there is no delivery
sale are in the holds the
Where the goods at the time of acknowledges to the buyer that he
and until such third person
by seller to buyer unless This is called Delivery by
Attornment.
behalf.Sec. 36(3).
goods on his

Expenses of Delivery incidental to putting the goods into a deliverable

7. expenses of and
Unless otherwise agreed, the Sec. 36(5).
seller.
state shall be borne by the
Delivery of the Wrong Quantity quantity of goods less than he contracted to sell,
8. delivers to the buyer a delivered he shall pay for
them at
(1) Where the seller acceptsthe goods so
may reject them, but if the buyer
tne buyer
rateSec. 371). of goods larger than he contracted to sell.
the contract quantity
Where the seller delivers to the buyer a contract and reject the rest, or he may reject the
(2) the
goods included in goods to delivered, he shall pay for them at
the
the buyer may accept the
the whole of the
whole. If the buyer accepts
Contract rate. -Sec. 37(2).

right to cancel the contract. If

the buyer
Example : equivalent to
the goods is notright to tender again the contract quantity subjectto the
The right to rejectthe seller has a the buyer is bound to accept
the same.
rejectsthe goods, contract and Vanaspati.ó
terms and
conditions of the and Hollis. Vilas Udyog Lid v. Prag
Phillips & Co. v.
Free to sell mixed with goods of
goods he contracted
Borrowman
seller delivers to the buyer
the
the buyer may accept the goods which are in
(3) Where the
not included in the contract, reject the whole.
.-Sec. 37(3).
a different description rest or may
and reject the
accordance with the contract
(1975) Guj. 112
6. AIR
5. (1878) 4 Q.B.D. 500
 TO SALE DP GOODS
THE LAW RELATING
170
of trade, special agreement or course
are subjcct to any usage
(4) The provisions of Section 37
of dealing between the parties.--Sec. 37(4).
9. Instalment Delivery goods is not bound to accept delivery thereof by
buyer of
() Unless otherwise agreed (1)the payment for each
instalments.Sec. 38(1). instalment delivery and separate
(2) Section 38(2) provides that whereparty fails to perform his obligationsor about one of the
(ii) a severable
instalment has been agrecd upon, and either a repudiation of the whole contract
instalments, the failure may amount to (i)but repudiated. The question is to
the contract cannot be case.
breach for which damages can be claimed contract and the
circumstances of the
be decided on the basis of the terms of the
10. Delivery to the Carrier or Wharfinger goods to a carrier for transmission to the buyer or to
Section 39 provides that deliveryfacieof
deemed to be delivery to the buyer. The seller shalI.
Wharfinger for safe custody, is Primabuyer, make a reasonable contract with the carrier or the
unless otherwise authorised by the goods are lost or damaged, the buyer may refuse to treat
wharfinger. If he does not do so and the
himself or may hold the seller responsible for the damages. In cases of
such delivery as delivery to is usual to insure, the seller shall notify the buyer
so that he
set transit, in circumstances where it
so, the goods remain at his risk during the transit.
can insure. If the seller fails to do

11. Examining the Goods for the purpose of ascertaining whether they are
The buyer has the right to examine the goods
-Sec. 41.
in conformity with the contract.

12. Acceptance he intimates to the seller that he has

The buyer is deemed to have accepted the goods when and he does any act, in relation to
him
accepted them, or when the goods have been delivered to after the lapse of a reasonable
them which is inconsistent with the ownership of the seller, or when, rejected them.Sec. 42.
time, he retains the goods without intimating to the seller that he has
Goods
13. Buyer is not Bound to Return Rejected
Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept
them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he
intimates to the seller that he refuses to accept them,Sec. 43.

14. Liability of Buyer

The buyer is liable to the seller for any loss occasioned by his neglect or refusal to take
delivery,and also for a reasonable charge for the care and custody of the goods.-Sec. 44.

DUTIES OFSELLER OF GOODS

1. Delivery them,
() It is the duty of the seller to deliver the goods and of the buyer to accept and pay for
contract of sale,-Sec 31
in accordance with the terms of the
(2) Unless otherwise agreed, delivery of the goods and payment of the price are concurrent
seller shall be ready and willing to give the
conditions, that is to say, the possession of the goodsto
 PERFORMANCE OF THE
CONTRACT OF SALE 171
buyer in exchange of the price, and the
exchange of possession of the buyer shall be ready and willing to pay the price in
has thegoods.Sec.
The seller of goods 32.
according tothe rules
duty ofgiving delivery according to the terms of the contract and
contained in the Sale of Goods Act. (See pp. 168-170)
2 Risk of Deterioration in the Goods
Where the seller of goods agrees to deliver them at
where they are when sold, the buyer shall, his own risk at a place other than that
aterioration in the goods necessarily incidentnevertheless, unless otherwise agreed, take any risk of
to the course of
transit.-Sec. 40.
3.Damages for Non-Delivery
Where the seller wrongfully neglects or refuses to deliver the
may sue the seller for a damages for goods to the buyer, the buyer
non-delivery.-Sec. 57.
4. Specific Performance
Under certain circumstances in any suit for breach of contract to deliver
goods, the Court may, if it thinks fit, on the application of the plantiff, by itsspecific or ascertained
decree direct that the
contract shall be performed specifically. The power of the court to order specific
such cases is to be used subject to rules contained in the Specific Relief Act performance in
performance of contracts.Sec. 58.
regarding specific

DUTIES OF BUYER OF GOODS

The buyer of goods has the following duties :
1. Payment of Price
He must pay the price of goods according to the terms of the contract.-Sec. 31.
2. Compensation
If he wrongfully refuses to accept delivery, he must pay compensation to the seller.Sec. 32,
Sec. 42, and Sec. 56.

3. Delivery
Unless otherwise agreed, the seller is not bound to deliver the goods without the application of
the buyer for delivery.Sec. 35.

4. Liability of Buyer
When the seller is ready and willing to deliver the goods and requests the buyer to take
delivery, and the buyer does not within a reasonable time after such request take delivery of the
goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery.
goods.-Sec. 44.
and also for a reasonable charge for the care and custody of the

5. Interest and Special Damages

damages in any case where by law
The seller or the buyer may recover interest or special
the money paid where the
nterest or special damages may be recoverable. He may also recover
for the payment of it has failed.
considerationabsence at such rate as it
In the of a contract to the contrary, the Court may award interest
thinks fit on the amount of the price
 THE LAW RELATING
172 TO SALE OF
(a) to the seller in a suit by him for the amount of
of the goods or from the date on which the
the price-- from
price was payable:
the date of Gthe O DS
(b) to the buyer in a suit by him for the refund of the
price in a case of a tender
on the part of the seller-from the date on which the payment was made. breach cont61.rac
of
-Sec.
RIGHTS OF BUYER OF GOODS
1. Delivery
The buyer has the right to have delivery of the goods according to the terms of the
Sec. 37.

2. Repudiation
Contract,-
Unless otherwise agreed, the buyer of goods is not bound to accept
Sec. 38. delivery by instalments
The buyer is not bound to accept the delivery of a wrong quantity (short
delivery ).-Sec. 37. delivery or extra-
3. Buyer'sright of Examining Goods
(1) Where goods are delivered to the buyer
deemed to have accepted them unless and until which he has not previously examined, he is not
he has had a reasonable
them for the purpose of ascertaining whether they
are in opportunity of examining
(2) Unless otherwise agreed, when the conformity with the contract.-Sec. 41(1).
bound, on request, to afford the buyer a seller tenders delivery of goods to the buyer, he is
purpose of ascertaining whether they are inreasonable opportunity of examining the goods for the
conformity with the contract.Sec. 41(2).
4. Buyer is not bound to
return rejected goods.
Sec. 43. See p. 170,
5. Damages for non-delivery
Sec. 57. See p. 171,
6. Specific performance
Sec. 58. See p. 171,
7. Remedy for Breach of Warranty
Sec. 59, See p. 153,
8. Repudiation of Contract
Sec. 60. See p. 153,
9. Effects of Tax Changes
Where in a contract of sale
on the articles in there Is no stipulation for the was no
tax
question or where the
any customs or excise duty or any contract is for the sale payment of there
taxes or subsequently
tax of goods tax
decreased or remitted, on the sale or paid, and, increased.
(a) the seller may add to the purchase of goods is imposed,
price the
(b) the buyer may deduct
from the priceamount of duty
the amount imposed or increased, and
of duty decreased or remitted.
 PERFORMANCE OF THE CONTRACT OF SALE 173

The aforesaid provisions willnot apply if a contrary intention appears from the terms of he
contract.-Sec. 64A

RIGHTS OF SELLER OF GOODS

1. Remedies
Unpaid. sellers have certain renmedies viz., Seller's Lien, Right of Stoppage in Transit, Right of
Resale and Suit for the Price. (See pp. 175)
2. Enforcement of Liabilities of Buyer
The seller can enforce the liabilities of buyer for not taking delivery.-Sec. 44. (See p. 17)
3.Other rights
The seller has been given certain rights to the aggrieved party for the following reasons
Damages for Non-delivery (Sec. 57): Remedy for breach of warranty (Sec. 59); Repudiation of
Duty
Contract (Sec. 60): Interest and Special Damages (Sec. 6l); Increasing of the Amount of
Imposed or Increased (Sec. 64A). See pages l71-172.

RIGHTS OF THE UNPAIDSELLER AND REMEDIAL MEASURES

Who is an Unpaid Seller?
whole of the price has not
The seller of goods is deemed : to be an unpaid seller (a) when the
negotiable instrument has been
been paid or tendered or (b) when a bill of exchange or other received has not been fulfilled
it was
received as conditional payment, and the condition on which
otherwise.-Sec. 45(1).
by reason of the dishonour of the instrument or
position of a seller, e.g., agent of the seller.
The term 'seller' includes any person who is in the deemed to be an unpaid seller under
Suppose that goods worth Rs. 500 are sold. Theseller is
any of the following circumstances;
500), is not paid on the due date.
(a) If the whole of the purchase price (Rs.
negotiable instrument (bill of exchange or cheque) and
(b) If payment is made in the form of a
the instrument is dishonoured.

Unpaid Seller's Rights follows, (1) against the goods-Seller's Lien.

unpaid seller can be listed as
Rights of an personally-Suits for Price, Damages and
Transit, and Resale, (2) against the buyer
Stoppage in
Interest. The right are explained below.
47-49)
1. Sellers Lien or Vendor's Lien (Sections
exercised? The unpaid seller of goods, who is in possession of
When can the right of lien be payment or tender ofthe price in the following cases
them, is entitled to retain possession until without any stipulation as credit; expired:
where the goods have been sold has
(a)
the goods have been sold on credit but the term of credit
(b) where insolvent.
(C) where the buyer becomes The seller may exercise his right of lien
notwithstandino
Rules regardine seller's Lien : ()
or bailee for the buyer.
that he is in pOssession of the goods as agent credit, the seller cannot refuse to part with possession
sold on
(2) If the goods have been
unless the term of credit has expired.
Iaw (WP-25
 THE LAW RELATING
174 TO SALE OF
Example:
Goods are sold on Ist November on condition
that the price is
to be
GO DS
buyer
December. The seller must give delivery. But if the does nOt take paid on la
seller is in possession on Ist December, the
the price is paid.
seller can refuse to part
withdelposiverseys iOannd tthiMe
for any other
(3) Lien can be exercised for non-payment of the price, not
charges.
Example:
The seller cannot claim lien for godown charges which he had to incure for
goods in exercise of his lien for the price.
(4) When an unpaid seller has made a part delivery of the goods he can exercise
storing the
balance of the goods not delivered unless the part delivery was made under such Iien on the
to show an intention to waive the lien.
(5) The seller can abandon or waive the lien if he so desires.
circumstances as

(6) The unpaid seller does not lose his lien by reason only that he has obtained a
the price of the goods. decree for
Loss of right of lien : The unpaid seller of goods loses his lien thereon in the
(a) following cases
where he delivers the goods to a carrier or other bailee for the purpose of
the buyer without reserving the right of disposal of the goods; transmission to
(b) when the buyer or his ágent lawfully obtains possession of the goods; and
(c) by waiver thereof.

2. The Right of Stoppage in Transit (Sections 50-52)

Explanation : When the buyer of goods becomes insolvent, and the goods are in course of
transit to the buyer, the seller can resume possession of the goods from the carrier. This is knownas
the right of stoppage in transit.
Rules regarding the course of transit : The following points are to be noted in connection with
the right of stoppage in transit.
(i) The goods are deemed to be in course of transit from the time they are delivered to the
carrier to the time they are delivered to the buyer or his agent.
(ii) The right of stoppage in transit comes to an end as soon as the goods are
buyer or his agent. The carrier may become the agent of the buyer under some delivered lo uk
if after the arrival of the goods, at the appointed destination, the circumstances, c
that he holds the goods on his behalf. The seller's right to carrier acknowledge to the b0
such a case. Ashipowner carrying goods may be acting resume possession
as the agent ofcomes to d if the
the buyer
circumstances so indicate.
(iii) If the carrier wrongfully refuses to deliver the goods to the buyer's the transit isat an
end, and the seller's right is lost.
(iv) Where a part delivery has been made, the remainder of the goods may be stopped in
transit unless it is shown that the part delivery was made under such circumstances as toshowan

agreement to give up possession of the whole of the goods.

Who is an insolvent? The term insolvent is used here to denote a person who is inancially
befor
embarrassed. It is not necessary that the buyer should be declared insolvent by a COurt oflaw
the right of stoppage in transit can be exercised. the
The method of taking possession : The right of exercisedbythe
seller by taking actual possession or by giving noticestoppage
in transit is to be goodsto
to the carrier to redeliver the sellerorhis
seller. The carrier, upon such notice being given, is bound to tothe
agent. The expenses of redeliver
redelivery must be borne by the seller. the goods
 PERFORMANCE OF THE CONTRACT OF SALE 175

Resale
3.The Right of
(Sec. 54).The unpaid seller who has retained possession of the goods in exercise of his right
of lien or who has resumed possession from the carrier upon insolvency of the buyer. can resell the
goods.
(a) if the goods are of a perishable nature, without any notice to the buyer., and
(b) in other cascs after notice to the buyer, calling upon him to pay or tender the price within
reasonable time, and upon failure of the buyer to do so.
If the money rcalised upon such resale is not sufficient to compensate the scller. he can Sue
the buyer for the balance. But if he reccives more than what is due to him, he can retain the excess.
A
resale does not absolve the buyer from his liabilities to compensate the seller for damages
he may have suffcred.
The person who buys the goods upon such resale gets a good title even if the seller has failed
to give notice to the first buyer. But if no notice is given and the goods are sold. the seller cannot
sue the first buyer for damages for breach of contract and must pay back to the first buyer any
profit which he has realised from the resale (i.e., the amount received in excess of the original.
price).

4. Suit for the Price

(Sec. 55) Where under a contract of sale the property in the goods has passed to the buyer and
of the contract.
the buyer wrongfully neglects or refuses to pay for the goods according to the terms
the seller may sue him for the price of the goods. delivery
Where under a contract of sale the price is payable on acertain day irrespective of
may sue him for the price
and the buyer wrongfully neglects or refuses to pay such price, the seller
been appropriated to the
although the property in the goods has not passed and the goods have not
Contract.

5. Suit for Damages

for the goods, the seller
Where the buyer wrongfully neglects or refuses to accept and pay
may sue him for damages for non-acceptance.--Sec. 56.
u. Claim for Interest and Special Damages
any case where by law interest or speccial
The seller may recover interest or special damages in
money paid where the consideration for the
damages may be recoverable. He may also recover the
payment of it has failed.-Sec. 61 (p. 173)

STOPPAGE IN TRANSIT
DISTINCTION BETWEEN LIEN AND
to the insolvent buyer. But the right of Lien is
I. The right of Stoppage in Transit is applicable
Pplicable to all persons, solvent or insolvent.
The right of Lien is applicable to goods which are in the possession of the seller The right
2.
Sioppage in Transit is applicable to the goods which are in possession of the carrier
O to the buyer through the carrier. Therefore
3. The right of Stoppage in Transit is applied goods. But Lien means the right to 'retain' the
sIOPpage means the seller's right to "regain" the
applicable to goods only.
EOOds. Of course both the rights are
 177
PERFORMANCEsOF THEcONTRACT OF SALE

6. If the seller makes use of pretended bidding to raise the price. the sale is voidable at
the
option of the buyer.

Case Law on Auction Sales it can be withdrawn

() A bid by an intending buyer is construed as an offer, As an offer. hammer. or any
any time before acceptance, which in this case occurs by the fall of the
country to repeat the
other customary manner. It has been held that it is customary in this
final offer three times. Agra Bank v. Hamlin.7
against each other is known
(2) A combination between intending buyers not to be bid
"knock out" agreement. Such agreements are not illegal. Jyoti v. Jhowmul.5
put up from realising its fatr value
(3) Agreements which are likcly to prevent the property public good. but an agreemen
damp the sale, would certainly be against the
other at an auction is not illegal or
between two or more persons not to bid against each Hakim Sita Ram and others.
against public good. Lachhman Das and others v. with question of the passing of the
(4) Secc. 64(2) of the sale of goods Act does not deal
instead it deals with the compietion of the
property in the goods sold at auction sale but
Bangalore.
contracts of sale. Consolidated Coffee Lid. v. Coffee Board. does so
An auctioneer can set his own terms and conditions for holding an auction. If he
(5) not bound to accept
would govern the rights of the parties. The seller is
those conditions
can accept any lower bid. Lapses on the
the highest bid, it necessarily implies that he was not to be accepted for any reason. the
receipt of ahigher bid, and if the highest bid would be required to be held. M. Lachua
auction must be abandoned and fresh auction
Bangalore.5
Setty and Sons Lud. v. The Coffee Board,