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Effects of the contract

Transfer of property as between seller and buyer
Goods must be ascertained : As defined by section 18, “where there is a
contract for the sale of unascertained goods, no property in the goods is
transferred to the buyer unless and until the goods are ascertained”.
Explanation: Ascertained goods means, specific goods which are iden tified
or agreed upon at the time of the contract of sale. In order to pass property to
the buyer the goods must be ascertained. Transfer of property may be made
even if the goods are not delivered and if the property is transferred to the
buyer, the buyer becomes liable for any loss to the goods.
Example: A agrees to sell to B 20 tons of oil of a certain description in his
cistern, and he has more than 20 tons of that description in his cistern, no
property passes to B until 20 tons are separated from the rest and they are
appropriated to the contract.
Property passes when intended to pass : as defined by section 19:
1. W here there is a contract for the sale of specific or ascertained goods
the property i n them is transferred to the buyer at such time as the
parties to the contract intend it to be transferred.
2. For the purpose of ascertaining the intention of the parties regard shall
be had to the terms of the contract, the conduct of the parties and the
circumstances of the case.
3. Unless a different intention appears, the rules contained in sections 20
to 24 are rules for ascertaining the intention of the parties as to the time
at which the property in the goods is to pass to the buyer.
Explanation: W here there is a contract for sale of unascertained goods, no
property passes to the buyer unless goods are ascertained. But, in a sale
where goods are specified, the property is passed when the parties intend it
to pass. Such intention may be expressed in the contract or in another
manner.
Example: A agrees to sell and deliver certain goods to B and to be paid for at
the time of delivery. A delivers goods and B pays for them, thus property in
goods is passed to B.
Specific goods in a deliverable state : As defined by section 20, “where
there is an unconditional contract for the sale of specific goods in a
deliverable state, the property in the goods passes to the 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”.
Explanation: W here a contract of sale of goods is unconditional for the sale
of specific goods in a deliverable state, the property passes at the time of
formation of contract and time for payment of price or delivery of goods is not
essential. This case is called Sale.
Unconditional contract means it does not subject to any condition to be
fulfilled by the parties, whereas, goods are in deliverable state when the
buyer is bound to take delivery of them.
Example: A agrees to deliver 100 wooden tables of specific descri ption to B,
which are to be manufactured and the price to be paid at the time of delivery.
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The property is passed immediately to the buyer when the tables are in
deliverable state as to meet the description and the notice thereof is given to
B.
In the above example notice is given to the buyer in order to inform him
about transfer of property.
Specific goods in a deliverable state, when the seller has to do anything
thereto in order to ascertain price : As defined by section 22, “ where there
is a contract for the sale of specific goods in a deliverable state, but the
seller is bound to weigh, measure, test or do some other act or thing with
reference to the goods for the purpose of ascertaining the price, the property
does not pass until such act or thing i s done and the buyer has notice
thereof”.
Explanation: W here anything remains to be done to the goods by the seller
for the purpose of ascertaining the price of the goods, the property passes to
the buyer when the act has been done and the buyer has notice thereof
(Example No. 1).
Once the seller weighs the goods and the same is approved and paid
for by the buyer, the property is passed to buyer, but afterwards the seller
cannot ask to weigh the goods again (Example No. 2).
Example No. 1: A owns pile of iron. A contracts with B to weight and deliver
him 10 tons of iron, at the rate of Rs. 100 per ton. The property is passed to
B when A has weighed the iron and buyer has notice thereof.
Example No. 2: A owns pile of iron. A contracts with B to weight and deliver
him 10 tons of iron, at the rate of Rs. 100 per ton. A weighs part of the iron
contracted and delivers it to B. The property for the goods weighed and
delivers is transferred to B while the ownership of residue is not transferred
to B until it has also weighed and buyer has notice thereof.
Sale of unascertained good and appropriation : As defined by section 23:
1. W here there is a contract for the sale of unascertained or future goods
by description and goods of the description in a deliverable state are
unconditionally appropriated to the contract, either by the seller with the
assent of the buyer or by the buyer with the assent of the seller, the
property in the goods thereupon passes to the buyer. Such assent may
be expressed or implied, and may be gi ven either before or after the
appropriation is made.
Explanation: Appropriation of goods to the contract means to separate the
goods for the purpose of the contract and unconditional appropriation is when
the seller reserves no right against the goods. Goods may either be
appropriated by the buyer or seller with consent of each other. The seller may
appropriate the goods by separating the goods to be sold from other goods
and informing the buyer or by putting the goods in suitable container and
informing the buyer (Ex-1). The buyer may also appropriate the goods to the
contract with the assent of the seller when the goods are in his possession
(Ex-2).
2. Delivery to carrier: where, in pursuance of the contract, the selle r
delivers the goods to the buyer , or to a carrier or other bailee (whether

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named by the buyer or not) for the purpose of transmission to the buyer,
and does not reserve the right of disposal, he is deemed to have
unconditionally appropriated the goods to the contract (Example No.3).
Explanation: W here tradesman orders goods to be sent by a carrier, though
he does not name any carrier, the moment when goods are deliver to the
carrier operate as delivery to the buyer and the property passes to the buyer.
Further, the seller may not desire to pass property to the buyer by
reserving the right of disposal until the price is paid or the condition is not
fulfilled by the buyer.
Example No. 1: A owns 50 sacks of sugar, from which he agrees to sell and
deliver 10 sacks of sugar to B. A unconditio nally appropriates (separates) 10
sacks of sugar to the contract and gives such notice to the B. The property i n
goods has been passed to B.
Example No. 2: A, a bailee of B holds 200 bales of cotton. B asks A to sell
him 50 bales of cotton and appropriate s (separate for contract) them to the
contract with the assent of the seller and pays for them. The property in the
goods has been passed to B.
Example No. 3: A agrees to sell and deliver 20 maunds of wheat to B to be
delivered through railway. A delivers goods to railway without reserving his
right of disposal, he is deemed to have unconditionally appropriated the
goods to the contract and property in the goods passes to B at the moment
when the goods are delivered to the railway.
Goods sent on approval or “on sale or return” : As defined by section 24,
“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:-
1. W hen he signifies his approval or acceptance to the seller or does any
other act adopting the transaction (Ex-1);
2. 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(Ex-2).
Explanation: The property is passed to the buyer when he approves or
accepts or does any act signifying his approval and in case if the buyer
retains the goods, he neither signifies nor accepts, and the time fixed or a
reasonable time elapses.
Example No. 1: A delivers certain goods to B and thereby B signifies his
approval. The property is passed to B.
Example No. 2: A delivers goods to B to be approved within 01 week. B
retains the goods but does not signify his acceptance within 01 week. The
acceptance is assumed to have been made by B and property is passed when
the time period of B is elapsed.
Reservation of right of disposal : As defined by section 25:
1. W here there is a contract for the sale of specific goods or where the
goods are subsequently appropriated to the contract, the seller may, by
the terms of the contract or appropriation, reserve the right of disposal of
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the goods until certain conditions are fulfilled. In such case,

notwithstanding the delivery of the goods to a buyer, or to a carrier or
other bailee for the purpose of transmission to the buyer, the property in
the goods does not pass to the buyer until the conditions imposed by the
seller are imposed.
Explanation: The seller may reserve his right of disposal against the goods
by the terms of the contract or by appropriation of goods, unless conditions
imposed are not satisfied, the property in goods does not pass to the buyer.
Example No. 1: A agrees to sell and delivers 10 bales of cotton to B against
a certain price. A expressly reserves his right of disposal alleging that price
must be paid at the time of delivery. A delivers goods and B pays for them,
thus property in the goods is passes to B.
2. W here the goods are shipped or are dispatched by railway and are by
the bill of lading or by railway receipt delivera ble to the order of the
seller or his agent, the seller is prima facie deemed to reserve the right
of disposal.
Explanation: If goods are shipped then by bill of lading and if goods are
dispatched by railway then by railway receipt; the seller may reserve his right
of disposal.
3. W here the seller of the goods draws on the buyer for the price and
transmits the bill of exchange and the bill of lading or railway receipt to
the buyer together, to secure acceptance or payment of the bill of
exchange, the buyer is bound to return the bill or the railway receipt if he
does not honour the bill of exchange and if he wrongfully retains the bill
of lading or the railway receipt, the property in the goods does not pass
to him.
Explanation: If the seller required sum of money upon receipt of goods by
drawing bill of exchange and bill of lading or railway receipt to the buyer ; the
buyer is required to pay for the goods on receipt of goods, if he does not
honour the bill of exchange then he must return the bill of lading or railway
receipt. But if he retains bill of lading or railway receipt, the property in the
goods does not pass to him.
Risk prima facie passes with property : As defined by section 26, “ unless
otherwise agreed, the goods remain at seller’s risk until the property therein
is passed is transferred to the buyer, but when the property is transferred to
the buyer, the goods are at buyer’s risk whether delivery has been made or
not (Ex-1).
Explanation: W hen the goods have become the property of the buyer, he
must bear the loss arising from their destruction or injury, whether delivery
has been made or not. The parties may contract that the risk shall pass on
delivery irrespective passing of property.
Provided that, where 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.
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 (Ex-2 & 3).

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Example No. 1: A sells 50 cotton suits to B and B pays for them. B asks him
to deliver them through carrier , though the property in the goods has been
passed to the buyer, so B will be responsible for any loss occurred to the
goods during the course of transmission.
Example No. 2: A sells certain goods to B, but B continues in possession of
goods after sale, he is a bailee of the goods to B.
Example No. 3: A offers to sale stack of firewood to B and B accepts agrees
to pay Rs. 100/- for them. The stack of firewood was allowed to be in A’s
possession till certain day and not to be taken away till paid for. Before
payment and while the firewood is in A’s possession, it is accidently
destroyed by fire. B must bear the loss as it was an unconditional sale of
goods in a deliverable state and property passed to the buyer at the time of
sale and risk thereof passes with property (sec: 20).

Transfer of title
Sale by person not the owner: As defined by section 27, “subject to the
provisions of this act and of any other law for the time being in force, where
goods are sold by a person who is not the owner thereof and who does not
sell them under the authority or with the consent of the owner, the buyer
acquires no batter title to the goods than the seller had, unless the owner of
the goods is by his conduct precluded from denying the seller’s authority to
sell.
Explanation: There is a general rule of “Nemo dat quod non habet”
which means that “No one can give who himself does not have” . Similarly, no
man can pass a better title to another than he himself has. If seller deals with
the property of any other person, the transaction confer s no title even on an
innocent purchaser.
Example: Ali steals a mobile phone from his office and sells it to
Ahmed, who buys it in good faith. However, Ahmed will get no title to the
phone and will have to return it to the owner when he demands, i.e. there is
no transfer of title.
Provided that, where a mercantile agent is, with the consent of the owner, i n
possession of the goods or of a document of title to the goods, any sale made
by him, when acting in the ordinary course of business of a mercantile agent,
shall be as valid as if he were expressly authorized by the owner of the goods
to make the same; provided that buyer acts in good faith and has not at the
time of the contract of sale notice that the seller has no authority to sell.
Explanation: Though a mercantile agent is not the owner of the goods but he
has the authority to keep and sell goods of the owner, but he must possess
the goods under following conditions: -
i. He possesses goods with the consent of the owner .
ii. He is acting in ordinary course of business.
iii. The buyer acted in good faith, it means that the buyer does not have the
knowledge of the fact that the seller is not the actual owner.

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iv. No notice prohibiting authority to sell, it means that if the seller has
prohibited mercantile agent from selling goods, his authority to sell
stands revoked.
Sale by one of joint owners : As defined by section 28, “if one of several
joint owners of goods has the sole possession of them by permission of the
co-owners, the property in 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 ”.
Explanation: Joint owner means a person who owns some goods jointly with
other person or persons. He is not the sole owner. A joint owner can sell the
goods subject to following conditions:
i. He has the sole possession with others consent.
ii. Buyer acted in good faith. It means that the buyer does not have the
knowledge of the fact that the seller is not the actual ow ner.
iii. No notice prohibiting authority to sell, it means that if the seller has
prohibited mercantile agent from selling goods, his authority to sell
stands revoked.
Example: A owns a buffalo jointly with B and C. A possess the buffalo with
the consent of B and C. A sells the buffalo to D and D purchases it in good
faith.
Sale by person in possession under voidable contract : As defined by
section 29, “when the seller of goods has obtained possession thereof under
a contract voidable under section 19 or secti on 19-A of the Contract 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 seller’s defect of title ”.
Explanation: A person in possession of goods under a contract which is
voidable at the option of the other party, can sale the goods further to
another person subject to following conditions:
i. He possesses the goods under voidable contract, i.e. coercion, undue
influence, misrepresentation or fraud.
ii. He sells the goods before contract is cancelled.
iii. Buyer acted in good faith.
Example: A buys a gold ring from B under a contract caused by fraud. B has
the right to rescind the contract. Before B rescinds the contract, A sells the
ring to C. C bought the ring in good faith and innocently. B cannot recover the
ring from C.
Seller or buyer in possession after sale : As defined by section 30:
1. W here a person, having sold goods, continues or is in possession of the
goods or of the documents of the title to the goods, the delivery or
transfer by that person or by a mercantile agent acting for him, of the
goods or documents 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 the same effect as if the person making
the delivery or transfer were expressly authorized by the owner of the
goods to make the same.

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Explanation: This subsection deals with the case where seller has sold
goods but continues to be in the possession of the goods or document to title
to the goods, however, he is no more owner of the goods but might he sells
the goods or pledges them to a second buyer. If the second buyer buys them
in good faith without having knowledge of previous sale, then he will have a
good title to the goods even though the property in the goods was passed to
first buyer. Following conditions must be fulfilled in a sale by possessor (ex -
owner) of the goods to the third person:
i. He continues to be in possession of the goods.
ii. Buyer has no knowledge of the previous sale.
iii. Buyer acted in good faith.
Example: Ali sells a car to Ahmed to be delivered after 10 days, the property
has been passed to Ahmed. Ali resells the car to Amjad, who buys it
assuming that Ali is still the owner of car. Amjad has good title against the
car and Ahmed cannot claim it from Amjad.
2. W here a person, having bought or agreed to buy goods, obtains, with the
consent of the seller, possession of the goods or the d ocuments of title of
the goods, the delivery or transfer by that person or by a mercantile
agent acting for him, of the goods or documents of tile under any sale,
pledge or other disposition thereof to any person receiving the same in
good faith and without notice of any lien or other right of the original
seller in respect of the goods shall have effect as if such lien or right did
not exist.
Explanation: This subsection is vice versa of subsection (1), it deals with the
case where a person gets possession of the goods with the consent of the
seller having bought or agreed to buy them; thereafter that person himself or
through his agent delivers the goods or transfer documents of title to the
goods under sale or pledge to a second buyer receiving the goods in good
faith without having knowledge of any right of original seller against the
goods, then he gets a good title to them; and it would be assumed as if no
such right of original seller exists.
i. He obtains possession with consent of the seller.
ii. Receiver had no knowledge of right of original seller.
iii. Receiver acted in good faith.
Example: Ali agrees to sell a car to Ahmed to be paid after 2 months in cash.
Ahmed obtains possession of car from Ali with his consent and uses it. Later
on Ahmed sells the car to Amjad who buys it assuming that Ahmed is the real
owner of car without having knowledge of seller’s right over the goods. Amjad
has obtained good title to the goods. Ali cannot claim it from Amjad.

PERFORMANCE OF THE CONTRACT

Duties of the buyer and the seller : As defined by section 31, “it is the duty
of the seller to deliver the goods and of the buyer to accept and pay for them,
in accordance with the terms of the contract of sale”.
Explanation: There are two parties in a contract of sales of goods, the seller
and the buyer. The seller’s duty is to deliver the goods, whether he is the

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owner or nor, and whether he possesses the goods at the time of making the
contract of sale or not. The buyer’s du ty is to accept the goods and to pay the
price thereof, in accordance with the terms of the contract of sale.
Example: Ali promises Ahmed to deliver him 40 bales of cotton and
Ahmed promises to pay Rs. 20,000/- for them. Ali is bound to deliver the
goods to Ahmed and Ahmed is bound to accept the goods and pay thereof.
Payment and delivery are concurrent conditions : As defined by section
32, “unless otherwise agreed, delivery of the goods and payment of the price
are concurrent conditions, that is to say, the seller shall be ready and willing
to give possession of the goods to the buyer in exchange for the price, and
the buyer shall be ready and willing to pay the price in exchange for the
possession of the goods”.
Explanation: Concurrent conditions “means they have to be performed
simultaneously”, which means that, the seller must be ready and willing to
give delivery in exchange of price, and the buyer must be ready and willing to
pay the price in exchange for possession of the goods (Ex-1). Here the term
“unless otherwise agreed” means if the parties did not have different intention
(Ex-2).
Example No. 1: Ali contracts with Ahmed to deliver him certain goods and
Ahmed promises to pay a certain price thereof. Thus Ali must be ready and
willing to deliver goods and Ahmed is ready and willing to pay the price
thereof.
Example No. 2: A sells goods to B on credit of one month, thus B is entitled
to immediate possession without paying the price when possession is given.
Delivery how made: As defined by section 33, “ 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 authorized to hold them on his behalf”.
Explanation: Delivery means transfer of possession from one person to
another. Goods are delivered to the buyer by doing anything which the parties
agree or which has the effect of putting the goods in the possession of buyer
or his authorized person.
Modes of delivery: There are 3 modes of delivery as under:
1. Actual or physical delivery: where goods are delivered physically from
one person (seller) to another (buyer) .
2. Symbolic delivery: symbol means which represents the goods. Goods
are delivered with the help of symbol. For example: handing over keys
of a car to buyer, handing over keys of a warehouse to the buyer.
3. Constructive delivery: There is no direct delivery of goods from seller
to the buyer, but goods are delivered by seller to a third person or are
already in possession of third person and he agrees to hold them for the
buyer.
Example No. 1: Ali delivers tractor to Ahmed and Ahmed pays price thereof.
This is actual or physical delivery.

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Example No. 2: Ali sold 100 sacks of sugar to Ahmed lying at his warehouse.
Ali gave the keys of warehouse to Ahmed and asked to pickup his delivery
from there. This is a sym bolic delivery to Ahmed.
Example No. 3: Ahmed ordered a necklace and paid the price thereof.
Ahmed alleged that his wife shall come to take the necklace, as per terms
goldsmith delivers necklace to Ahmed. This is constructive delivery to Ahmed.
Effect of part delivery: As defined by section 34, “a delivery of part of
goods, in progress of the delivery of the whole, has the same effect, for the
purpose of passing the property in such goods, as a delivery of the whole; but
a delivery of part of the goods, with an intention of serving it from the whole,
does not operate as a delivery of the remainder”.
Explanation: If part of the goods are delivered in progress of the whole
delivery, then it is treated as a delivery of the whole; thus the ownership of
whole quantity is passed to the buyer. But if part delivery is made with the
intention of separating it from the whol e quantity, then it is just treated as the
delivery of parted goods and not whole. The ownership of only parted goods
is passed to the buyer and not of the remainder.
Example No. 1: Ali sold a pile of timber to Ahmed lying in his warehouse. Ali
asked his warehouse keeper to deliver that timber to Ahmed. Ahmed weighed
all the timber to be 50 maunds and took 20 mau nds from them. In this case,
Ali’s act to deliver pile of timber to Ahmed and Ahmed’s act to weigh the pile
and taking a part of them show that del ivery of the whole was contemplated
by them.
Example No. 2: Ali sold 100 sacks of wheat to Ahmed lying at his warehouse.
Later on, Ali sold 50 sacks among 100 to Amjad and delivered the same to
him. Afterwards, Ali delivered 50 sacks of wheat to Ahmed. He re, part
delivery of the wheat cannot be treated as the delivery of the whole wheat
sold as it is clear from Ali’s act of separating and delivering 50 sacks of
wheat to Amjad.
Buyer to apply for delivery: As defined by section 35, “apart from any
express contract, the seller of goods is not bound to deliver them until the
buyer applies for delivery”.
Explanation: In the absence of any specific agreement, the buyer shall claim
the delivery and the seller shall be bound to deliver goods when requested by
the buyer. If the seller fails to deliver the goods on the application of the
buyer, the seller is guilty of breach of the contract.
Rule as to delivery: As defined by section 36:
1. W hether it is for the buyer to take possession of the goods or for the
seller to send them to the buyer in a question depending in each case
on the contract, express or implied, between the parties. Apart from any
such contract, goods sold are to be delivered at the place at which th ey
are at the time of the sale, and goods agreed to be sold are to be
delivered at the place at which they are at the time of the agreement to
sell, or if not then in existence, at the place at which they are
manufactured or produced.

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Explanation: Place: Place of delivery is agreed by the contract, otherwise is

shall be made at such place where the contract or agreement to sell is made
or where the goods are manufactured or produced.
2. W here under the contract of sale the seller is bound to send the goods
to the buyer, but no time for sending them is fixed the seller is bound to
send them within a reasonable time.
Explanation: Time: If the time for delivery of goods is specified in the
contract it shall be made within that specified time . If incase the time is not
specified, it shall be made within a reasonable time.
3. W here the goods at the time of sale are in the possession of third
person, there is no delivery by seller to the buyer unless and until such
third person acknowledges to the buyer that he holds the goods on his
behalf.
Provided that nothing in this section shall affect the operation of the
issue or transfer of any document of title to goods.
Explanation: Goods in possession of third party: If a third person holds
goods for seller, the seller must at the time of sale communicate that third
person about sale of goods to buyer and buyer may be allowed to take
delivery, till then the buyer must obtain consent of third person to hold goods
for him.
4. Demand or tender of delivery may be treated as ineffectual unless made
at a reasonable hour. W hat is a reasonable hour is a question of fact.
Explanation: Reasonable Hour: If the time of delivery is fixed, the delivery
should be made within usual business hours i.e. 9AM to 5PM, otherwise such
delivery shall be considered as ineffectual.
5. Unless otherwise agreed, the expenses of and incidental to putting the
goods into a deliverable state shall be borne by the seller.
Explanation: Expenses of delivery: The expenses occurred for putting the
goods in a deliverable state must be borne by the seller, if the buyer is
compelled to pay such expenses, he may afte rwards recover them from
seller.
Delivery of wrong quantity: As defined by section 37:
1. W here the seller delivers to the buyer a quantity of goods less than he
contracted to sell, the buyer may reject them, but if the buyer accept the
goods so delivered he shall pay for them at the contract rate.
Example: A contracts B to sell and deliver hi m 100 bales of cotton. A delivers
80 bales of cotton to B. B may either reject the goods or accept them, if
accepted B shall pay for them at the contract rate.
2. W here the seller delivers to the buyer a quantity of goods larger than he
contracted to sell, the buyer may accept the goods included in the
contract and reject the rest, or [if the goods delivered are such that it is
difficult or time consuming to separate the quantity contracted for] he
may reject the whole. If the buyer accept the whole of the go ods so
delivered, he shall pay for them at the contract rate.
Example: A contract B to sell and deliver him 100 bales of cotton. A delivers
120 bales of cotton to B. B may either reject the whole goods, or accept the
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whole and shall have to pay for whole of them, or he may also accept 100
bales of cotton as contract and shall have to pay for them at the contract rate
and reject the rest 20 bales of cotton.
3. W here the seller delivers to the buyer the goods he contracted to sell
mixed with goods of a different description not included in the contract,
the buyer may accept the goods which are in accordance with the
contract and reject the rest, or may reject the whole. “Here mixed
means accompanied”.
Example: A orders B to deliver him specific articles of chine . B sends the
ordered articles in a hamper with other articles of chine which had not been
ordered. A may either reject the whole goods, or accept the whole, or may
only accept the goods which are in accordance with description.
4. The provisions of this section are subject to any usage of trade, special
agreement or course of dealing between the parties.
Installment delivers: As defined by section 38:
1. Unless otherwise agreed, the buyer of goods is not bound to accept
delivery thereof by instal lments.
Example: A contract with B to deliver him 100 bags. A delivers only 80 bags
and tells B to deliver the remaining after 10 days. B may either accept or
reject the whole goods.
2. W here there is a contract for the sale of goods to be delivered by stated
installments which are to be separately paid for , and the seller makes
no delivery or defective delivery in respect of one or more insta llments,
or the buyer neglects or re fuses to take delivery of or pay for one or
more installments, it is a question in each case depending on the terms
of the contract and the circumstances of the case, whether the breach
of contract is a repudiation of the whole contract, or whether it is a
severable breach giving rise to a claim for compensation, but not to a
right to treat the whole contract as repudiated.
Explanation: This subsection contemplates that if it is agreed to make
delivery and payment by installments, then parties are required to determine
the rights and liabilities and payments themselves.
Example: A agrees to sell goods to B to be delivered in three installments in
January, February and March, 2018, and to be paid for within 14 days after
delivery. B fails to pay for the first installment on the due date. A may refuse
to make further deliveries.
Delivery to carrier or wharfinger : As defined by section 39:
1. W here, in pursuance of a contract of sale, the seller is authori zed or
required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer or delivery of the goods to a wharfinger for
safe custody, is a prima facie deemed to be delivery of the goods to the
buyer.
Explanation: W hen the seller is to transit goods to the buyer, the delivery to
carrier or wharfinger is considered to be delivery of goods to the buyer and
the buyer shall not be responsible for the loses.
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Example: Ali orders certain goods through phone call at Karachi and asks for
delivery through carrier. The delivery to carrier operates as the delivery to Ali
and the property passes at the moment when the goods is handedover to
carrier.
2. Unless otherwise authori zed by the buyer, the seller shall make such
contract with the carrier or wharfinger on behalf of the buyer as may be
reasonable having regard to the nature of the goods and the other
circumstances of the case. If the seller omits so to do and the goods are
lost or damaged in course of transit or whilst in the custody of the
wharfinger, the buyer may decline to treat the delivery to the car rier or
wharfinger as a delivery to himself, or may hold the seller responsible in
damages.
Explanation: It is the duty of seller to safeguard the interest of the buyer and
to enter into a contract with carrier or wharfinger so as to hold them
responsible for the loses, incase the seller fails to do so and the goods are
damaged during transit or sage custody, the buyer may decline the delivery to
himself or may hold the seller responsible for damages.
Example: Ali orders to Ahmed 5 laptops through phone call at Karachi and
asks for delivery through carrier. Laptops are delicate and can be damaged if
carried with carelessness. Ahmed enters into a contract with carrier for safe
transmission of goods to Ali. If Ahm ed fails to do so, and goods are damaged,
Ali may decline their delivery to carrier as delivery to himself. Ahmed shall be
liable for damages.
3. Unless otherwise agreed, where goods are sent by the seller to the
buyer by a route involving sea transit, in ci rcumstances in which it is
usual to insure, the seller shall such notice to the buyer as may enable
him to insure them during their sea transit, and if the seller fails so to
do, the goods shall be deemed to be at his risk during such sea transit.
Explanation: In-case of transit of goods by sea , where it is usual to insure
the goods, in such a case the seller is bound to give notice of shipment to the
buyer as may enable him to insure the goods. If the seller does not do so, the
risk does not pass to the buyer.
Example: Ali orders to Ahmed a car from Saudi to be delivered through
shipment. It is ordinary to insure the goods in sea transit. Ahmed must inform
Ali to insure his car, but if Ahmed failed to do so, the goods shall be at the
risk of Ahmed due to his omission to inform Ali.
Risk where goods are delivered at distinct place : As defined by section
40, “W here the seller of goods agrees to deliver them at his own risk at a
place other than that where they are when sold, the buyer shall nevertheless ,
unless otherwise agreed, take any risk of deterioration in the goods
necessarily incident to the course of transit.
Explanation: If the goods are to be delivered at a distant place, then the
liability of deterioration incidental to the course of the trans it lies with the
buyer even though the seller agrees to deliver at his own risk.
Illustration: A agrees to sell hoop iron to B to be sent from port X to port Y.
The iron is clean and bright when it is dispatched, but it is rusted to a certain

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extent when before it reaches port Y. The seller is not responsible if the iron
becomes unmerchantable to that extent.
Buyer's right of examining the goods : As defined by section 41:
1. W here goods are delivered to the buyer which he has not previously
examined, he is not deemed to have accepted them unless and until he
has had a reasonable opportunity of examining them for the purpose of
ascertaining whether they are conformity with the contract.
Explanation: This is a case where goods are not previously examined, in
such a case, the goods are not deemed to have been accepted if the buyer
has not been given a reasonable opportunity to examine them.
Example: A agrees to sell B a certain oil contained in a cask. B has not
examined the oil nor has he been given opportunity examine it. The goods
are not deemed to have been accepted.
2. Unless otherwise agreed, when the seller tenders delivery of goods to
the buyer, he is bound, on request, to af ford the buyer a reasonable
opportunity of examining the goods for the purpose of ascertaining
whether they are in conformity with the contract.
Explanation: This is a case where seller tenders delivery to the buyer; buyer
may also waive the right of inspe ction. But if buyer request s, the seller must
give him a reasonable opportunity of examining the goods, otherwise it is not
a valid tender of the goods.
Example: A agrees to sell B a certain oil contained in a cask lying at a
particular place. B is asked to take delivery against payment of price but he is
not allowed by the seller to open the cask and examine the oil, it is not a
valid tender of the goods.
Acceptance: As defined by section 42, “t he buyer is deemed to have
accepted the goods when he intimates to the seller, that he has accepted
them, or when the goods have been delivered to him and he does any act in
relation to them which is inconsistent with the ownership of the seller, or
when, after the lapse of a reasonable time he retains the goods wit hout
intimating to the seller that he has rejected them.
Explanation: Three modes of acceptance are discussed here:
1. W hen the buyer intimates seller about acceptance.
Example: A sells and delivers a stack of firewood to B. B accepts it and
intimates the seller about his acceptance.
2. W hen the goods have been delivered to the seller and he does any act
in relation to them which is inconsistent with the ownership of the seller.
Example: A sells and delivers a stack of firewood to B. B resells the same to
C. The goods are deemed to have been accepted.
3. After the lapse of reasonable time, when he retains the goods without
intimating seller that he has rejected the goods.
Example: A sells and delivers a stack of firewood to B. The goods are not in
accordance with the description, therefore B rejects the goods and retains
them without intimating the seller that he has rejected the stack of firewood
delivered to him. After a lapse of reasonable time, the acceptance is deemed
to have been made by the buyer.
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Buyer not bound to return rejected goods : As defined by section 43,

“unless otherwise agreed, where goods are delivered to the buyer and he
refuses to accept them, having the right so to do, h e 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”.
Explanation: W here the buyer rightfully rejects the goods, he is not bound to
return goods to the seller and bear expenses or face trouble of returning the
goods. But the buyer, being an involuntary bailee of the goods, must take as
much care of the goods as a man of ordinary prudence would, take his own.
Example: A agrees to sell and deliver to B 100 bales of cotton of a particular
description. A makes delivery, B found that the goods are not in accordance
with the description, though B may rightfully reject the goo ds. B is not bound
to return the goods to the seller but he must take care of them as a bailee.
Liability of buyer for neglecting or refusing delivery of goods : As defined
by section 44, W hen 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,
and also for a reasonable cha rge for the care and custody of the goods .
Provided that nothing in this section shall affect the rights of the seller
where the neglect or refusal of the buyer to take delivery amounts to a
repudiation of the contract.
Explanation: This section deals wit h the case where the property has been
passed to the buyer, in such a case if the buyer fails or neglects to take
delivery within a reasonable time, the buyer is liable for any loss and a
reasonable charge for the care and custody of the goods. Charges for care
mean the costs borne by the supplier in protection of the goods from damage .
Example: Ali sold 200 bales of cotton to Ahmed to be delivered after two
days at warehouse of Ahmed. Ali delivers the goods through truck, but Ali
refuses to take delivery. After few hours it rained for which truck driver
bought plastic and covered it properly and took proper care. Ahmed is liable
to pay damages occurred during such protection of goods.

Rights of unpaid seller against the goods

"Unpaid seller" defined: As defined by section 45:
1. The seller of goods is deemed to be an "unpaid seller" within the
meaning of this Act:
a. when the whole of the price has not been paid or tendered;
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.
2. In this Chapter, the term "seller" includes any person who is in the
position of a seller, as, for instance, an agent of the seller to whom the
bill of landing has been endorsed, or a consignor or agent who has
himself paid, or is directly responsible for, the price.

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Explanation: “W hole of the price” means the payment is not paid completely,
even if some part of the price is not paid by the buyer, the seller becomes
unpaid.
Example: A sells certain goods to B against Rs. 1000/ -. B pays Rs. 950/- but
fails to pay the remaining balance. A be comes insolvent.
W hen the payment is by negotiable instruments i.e. cheque, bill of
exchange etc, the seller becomes unpaid when such negotiable instrument is
dishonoured.
Note: The seller is not unpaid seller within the period when the payment is
not required to be paid. For example, A sells a TV to B against Rs. 20,000/ -
on one month credit. The seller is not unpaid within the period of one month,
but the credit time elapses and the buyer has not paid the price, the seller
becomes an unpaid seller.
Unpaid seller's rights: As defined by section 46,
1. Subject to the provisions of the 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 implic ations of
law:
a. lien on the goods for the price while he is in possession of them;
b. in case of the insolvency of the buyer a right of stopping the goods
in transit after he has parted with the possession of them;
c. a right of re-sale as limited by this Act.
2. W here the property in goods has not passed to the buyer, the unpaid
seller has, in addition to his other remedies, a right of withholding
delivery similar to and co-extensive with his rights of lien and stoppage
in transit where the property has passed to the buyer.
Explanation: If it is a case of sale despite of the fact that the property has
been passed to the buyer, the unpaid seller has the right of lien, stoppage in
transit and resale. If it is the case of agreement of sell where the property
has not been passed to the buyer, the unpaid seller has the right to withhold
delivery in addition to the right of lien, stoppage in transit and resale.
Right of lien: It is the right to retain the possession of the goods until paid
for. Right of lien is exercisable when the price is due and unpaid , irrespective
of the insolvency of the buyer. The right of lien attaches only if the seller is in
possession. The seller can exercise this right if he is not the owner and the
property has transferred, because a person cannot lien his own goods . If the
seller is still owner of the goods, he has the right to withhold delivery and the
right is analogous to a lien called quasi -lien.
Right of stoppage in transit: The right of stoppage during transit arises only
when the buyer is insolvent. It is exercisable when the seller has parted with
possession and his lien is gone.
Right of Resale: if the seller has sold the goods to the buyer but the buyer
fails to pay thereof, the seller may resale the goods to another person.
Unpaid Seller's Lien
Seller's lien: As defined by section 47:

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1. 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:
a. where the goods have been sold without any stipulation as to credit;
b. where the goods have been sold on credit, but the term of credit
has expired;
c. where the buyer becomes insolvent.
2. The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer.
Explanation: Seller can only exercise right of lien when he is in the
possession of the goods and the property has been passed to the buyer , until
payment is made in the following cases:
a. Goods are sold without credit: where the goods are sold, but nothing
is said as to time of delivery or payment, the seller is entitled to retain
possession of the goods until the price is paid.
b. Goods sold on credit: where goods are sold on credit, the seller can
only exercise his right of lien after elapse of credit period and not
before. For example, A sells 100 sacks of sugar to B against a certain
price on the credit of one month. Goods are agreed to remain in A’s
possession till the expiry of credit period of one month, the credit p eriod
elapses but B does not pay for them. A may retain possession of the
goods until he is paid for.
c. Insolvency of buyer: whether the sale is by credit or not or whether the
credit period has expired or not, buyer becomes insolvent before the
price is paid, the seller is entitled to exercise his right of lien. For
example, A sells 100 sacks of sugar to B against a certain price on the
credit of one month. Goods are agreed to remain in A’s possession till
the expiry of credit period of one month, before ex piry of one month
credit B becomes insolvent. A may retain possession of the goods until
he is paid for.
Note:- The right of lien is only for unpaid price and not for other
expense or claim.
Part delivery: As defined by section 48, “where an unpaid seller has made
part delivery of the goods, he may exercise his right of lien on the remainder,
unless such part delivery has been made under such circumstance as to
show an agreement to waive the lien”.
Explanation: An unpaid seller makes a part delivery but sti ll he may exercise
his right of lien over the remaining goods in his possession, unless there
exists an agreement between the parties to wave the lien with part delivery
(Example No. 1). W here the goods are deliverable in installments which are
to be separately paid for, the seller cannot retain the installments for the
reason of non-payment of the price, though he may on buyer’s insolvency
(Example No. 2).
Example No. 1: Ali sold 50 sacks of wheat to Ahmed to be paid for after 10
days of the contract of sale. Ali delivered 20 sacks of wheat to Ahmed before
date of payment. After 10 days Ahmed does not pay the price of the goods

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alternately Ali becomes unpaid seller. Ali may exercise his right of lien over
remaining 30 sacks of wheat.
Example No. 2: A agrees to sell goods to B to be delivered in five monthly
installments and to be paid for within 14 days after delivery. The first three
installments are delivered and paid for. The fourth installment is made but not
paid for. B becomes insolvent. A is entitled to retain the fifth installment till
he has been paid for both fourth and fifth installments.
Termination of lien: As defined by section 49:
1. The unpaid seller of goods loses his lien thereon :-
a. when he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer without reserving the right of
disposal of the goods;
b. when the buyer or hi s agent lawfully obtains possession of the
goods;
c. by waiver thereof.
2. The unpaid seller of goods, having a lien thereon, does not lose his lien
by reason only that he has obtained a decree for the price of the goods.
Explanation: Seller losses right of lien, when:-
1. He delivers to carrier for transmission without reserving right of
disposal: Right of disposal is to keep control over the goods by bill of
lading. It is a general rule that the delivery by the seller to the carrier is
assumed as the delivery to the buyer, unless the seller reserves right of
disposal. Incase the seller fails to reserve right of disposal of goods, he
loses his right of lien as soon as the delivery is made to carrier.
W here the seller reserved the right of disposal and the buyer
became insolvent while the goods are in transit, the right of lien
becomes changed into a right of stoppage in transit.
Example: A agrees to sell and deliver 10 sacks of sugar to B through carrier.
A loses his right of lien as soon as he made delivery to the carrier without
telling the carrier that he is the owner of the goods until buyer pays for them
and to bring back the goods if buyer fails to pay.
2. Buyer obtains lawful possession: where the buyer has lawfully
possessed the goods or the delivery has been made to the buyer,
afterwards seller cannot claim his right to lien over the goods which are
not in his possession. For example, Ali agrees to sell and deliver 10
sacks of sugar to Ahmed through carrier. Ali cannot afterwards claim his
right to lien when he has delivered the goods to the carrier without
reserving right to disposal as the delivery of goods to the carrier is
deemed to have been made to Ahmed.
3. Seller waived the right to lien: Right to lien is also lost by waiver. it
may be waived expressly or by implication:
a. Express waiver: where there is term in the contract of sale that
the seller shall not be entitled to retain possession until payment
of the price.
b. Implied waiver: The lien is waived by implication:
i. W here goods are sold on credit, during the credit period, but
the lien revives after elapse of such period ;
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ii. W hen seller takes a bill for the price payable at a future time,
during such time of the bill; but the lien revives after elapse
of such period;
iii. If seller assents to a sub-sale;
iv. If the seller parts with the document of title so as to exclude
his title by estoppel (sec:27);
v. If the seller wrongfully refuses to deliver the goods, such a
refusal being a repudiation of the contract.
Stoppage in Transit
Right of stoppage in transit: As defined by section 50, “subject to the
provisions of this Act, when the buyer of goods becomes insolvent, the
unpaid seller who has parted with the possession of the goods has the right
of stopping them in transit, that is to say, he may resume posses sion of the
goods as long as they are in the course of transit, and may retain them until
the payment or tender of the price ”.
Explanation: W hen the seller parts with possession right to lien gets over
and right to stoppage rises , and when the goods are in transit and buyer
becomes insolvent, the seller may exercise his right of stoppage in transit
and regain the possession of the goods until paid for. The conditions which
must be satisfied are i) the seller must be unpaid, ii) the buyer must be
insolvent, iii) seller must have part with the possession of the goods and iv)
the buyer must not have acquired it.
Example: Ali sells and delivers to Ahmed 100 sacks of sugar to be paid on
delivery. W hile the goods are in transmission, Ahmed became insolvent. Ali
called the carrier to not to deliver goods to Ahmed and regains possession of
the goods until paid for them by the Ahmed.
Duration of transit: As defined by section 51: Explanation: As the seller is
entitled to regain the possession of the goods if during the transmission
buyer becomes insolvent. This section answers the question that when are
the goods said to be in course of transit?
1. Goods are deemed to be in course of transit from the time when they
are delivered to a carrier or other bailee for the purpose of transmission
to the buyer, until the buyer or his agent in that behalf takes delivery of
them from such carrier or other bailee.
Explanation: Goods are said to be in the course of transit when they are
delivered to the carrier or other bailee for their transmission to the buyer or
his agent until buyer or his agent obtains their possession.
Example: Ali sold certain goods to Ahmed. Transit commences when Ali
handsover goods to carrier and ends up when delivered to Ahmed or his
agent.
2. If the buyer or his agent in that behalf obtains delivery of the goods
before their arrival at the appointed destination, the transit is at an end.
Explanation: Transit ends when the buyer or his agent obtains the delivery of
goods even before their arriv al at appointed destination.

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Example: Amjad sold goods to Arsalan to be delivered at Hyderabad from

Karachi. Transit commences when Amjad handsover goods to carrier and
ends up when Arsalan obtains goods at Jamshoro.
3. If, after the arrival of the goods at the appointed destination, the carrier
or other bailee acknowledges to the buyer or his agent that he holds the
goods on his behalf and continues in possession of them as bailee for
the buyer or his agent, the transit is at an end it is immaterial that a
further destination for the goods may have been indicated by the buyer.
Explanation: W hen carrier delivered goods at appointed destination; if the
carrier agrees to hold goods for the buyer or his agent as a bailee, then
transit is at its end.
Example: Akram delivers goods to a carrier to be delivered to Ahmed at a
certain place in Hyderabad. Akram delivers goods at appointed place. Ahmed
asks to further deliver them at Matiari and carrier agrees so. Transit ends up
when carrier agrees to hold and further deliver goods for Akram at Matiari.
4. If the goods are rejected by the buyer and the carrier or other bailee
continues in possession of them, the transit is not deemed to be at an
end, even if the seller has refused to receive them back.
Explanation: If the carrier possesses goods after rejection of buyer and even
seller’s refuses to receive them back, the transit does not end.
Example: Ali sold and delivered goods to Ahmed through carrier. Ahmed
refused to take delivery and rejected the goods, carrier possesses the goods,
Ali also receives to take the goods back ; transit does not end.
5. W hen goods are delivered to a ship chartered by the buyer, it is a
question depending on the circumstances of the particular case,
whether they are in the possessi on of the master as a carrier or as
agent of the buyer.
Explanation: If buyer rents a ship for shipment of goods, either master of
ship is the carrier or agent of the buyer depends on the circumstances of the
case.
Example: Asghar is a trader in UAE; Ali orders him goods and rents a ship
for delivery of goods towards him. Captain of ship possess goods as a n agent
of Ali, transit ends when Asghar handsover goods to captain.
6. W here the carrier or other bailee wrongfully refuse s to deliver the goods
to the buyer or his agent in that behalf, the transit is deemed to be at an
end.
Explanation: Transit is at its end when the carrier or his other agent
wrongfully refuses to deliver goods to the buyer or his agent .
Example: Ahmed sold goods to Ali and handedover them to carrier for the
purpose of transmission to Ali. Carrier takes the goods but afterwards refuses
to deliver them to Ali; the transit it at its end.
7. W here part delivery of the goods has been made to the buyer o r his
agent in that behalf, the remainder of the goods may be stopped in
transit, unless such part delivery has been given in such circumstances
as to show an agreement to give up possession of the whole of the
goods.
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Explanation: Seller has delivered part of the goods to buyer or his agent,
and then the remaining goods may be stopped in transit by the seller, only if
there is no agreement to give up possession of the whole goods.
Example: Amjad sold 100 bales of cotton to Asghar . He delivered 50 bales of
cotton to Asghar and Asghar obtains them. Later on, Amjad delivers
remaining 50 bales of cotton to Asghar through carrier. Amjad can retain the
later part of goods unless they are not obtained by Asghar.
How stoppage in transit is affected: As defined by section 52:
1. The unpaid seller may exercise his right of stoppage in transit either by
taking actual possession of the goods, or by giving notice of his claim to
the carrier of other bailee in whose possess ion the goods are. Such
notice may be given either to the person in actual possession of the
goods or to his principal. In the later case the notice, to be effectual,
shall be given at such time and in such circumstances that the principal,
by the exercise of reasonable diligence, may communicate it to his
servant or agent in time to prevent a delivery to the buyer .
Explanation: As defined by this section the seller can exercise his right of
stoppage in transit either by taking actual possession of the goo ds or by
communication of notice of his claim to the buyer or other bailee, or to the
principal of the possessor of the goods. Incase of notice to the principal, the
circumstances must be as such that the principal may be able to
communicate such notice to his servant or agent.
2. W hen notice of stoppage in transit is given by the seller to the carrier or
other bailee in possession of the goods, he shall re -deliver the goods to
or according to the directions of the seller. The expenses of such re -
delivery shall be borne by the seller.
Explanation: Incase of exercise of right of stoppage by communication of
notice, the carrier or other baille shall re -deliver the goods to the seller or act
in accordance with his direction, any expenses that incur during such course
shall be borne by the seller.

Transfer by Buyer and Seller

Effect of sub-sale or pledge by buyer : As defined by section 53:
1. Subject to the provisions of this Act, the unpaid seller's right of lien or
stoppage in transit is not affected by any sale or other disposition of the
goods which the buyer may have made, unless the seller has assented
thereto:
Provided that where a document of title to goods has been issued
or lawfully transferred to any person as buyer or owner of the goods,
and that person transfers the documents to a person who takes the
documents in good faith and for consideration, then, if such last
mentioned transfer was by way of sale, the unpaid seller's right of lien
or stoppage in transit is defeated, and if such last mentioned tra nsfer
was by way of pledge or other disposition for value, the unpaid seller's
right of lien or stoppage in transit can only be exercised subject to the
rights of the transferee.

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Explanation: This section deals with such a case where the buyer sells the
goods or pledges them to another person without paying whole price thereof
to the seller. In such a case, any sale or pledge by buyer will not defeat the
seller’s right of lien or stoppage in transit, unless the seller assents to such
sale of pledge. Merely the acknowledgement of seller regarding sale or
pledge by the buyer is not enough but the circumstances must show that the
seller has waived his rights against the goods (Example No. 1 and 2).
Example No. 1: A sells certain goods to B for a price of Rs. 2000/-. A still
possess the goods. B sells the goods further to C without payment of price to
A. A retains the goods by exercising his right of lien. A’s right of lien is not
affected by further sale of goods by B.
Example No. 2: A sells and delivers certain goods to B for a price of Rs.
5000/-. B pledges the goods with C to secure a debt of Rs. 1000/ -. B does not
pay or becomes insolvent. A exercises his right of stoppage in transit and
regains the possession of the goods.
Explanation of exception: If incase the seller issues document of title of
goods lawfully to the buyer showing the buyer as owner of the goods, and the
buyer transfers document of title of the goods to another person who takes it
in good faith and for a consideration, in such a case if transfer was by way of
sale then the rights of seller against the goods are defeated (Example No. 3);
and if such transfer was by way of pledge or other disposition for value , the
seller can only exercise his right of lien or stoppage in transit subject to the
rights of the pledgee (Example No. 4).
Example No. 3: A sells certain goods to B for a price of Rs. 2000/ - and
forwards a railway receipt to B. B sells goods to C and C buys them in good
faith (that buyer is absolute owner) for a consideration. A cann ot exercise his
right of stoppage in transit against C.
Example No. 4: A sells certain goods to B against Rs. 10,000/ - and forwards
a bill of lading to B and B deposits bill of lading with C to secure a debt of Rs.
4000/-. B becomes insolvent. A may exerci se his right of stoppage in transit
by satisfying the debt of C i.e. paying Rs. 4000/ -.
2. W here the transfer is by way of pledge, the unpaid seller may require
the pledgee to have the amount secured by the pledge satisfied in the
first instance, as far as possible, out of any other goods or securities of
the buyer in the hands of the pledgee and available against the buyer.
Explanation: This subsection deals with a case where the buyer has pledged
the goods for securing any debt, the pledge e also holds other goods as
security besides the goods mentioned in document of title of goods; the
unpaid seller may ask the pledge to satisfy his security with the goods other
than those mentioned in document of title of goods Example No.5).
Example: A sells the goods to B for a price of Rs. 5000/ - and forwards a bill
of lading. B pledges the bill of lading with C in order to secure his debt of Rs.
2000/-. C also holds other goods of B ot her than those transferred by bill of
lading. A asks C to satisfy his security resorting the goods other than those
mentioned in bill of lading. Thereafter , when C has done so, the seller may
exercise his rights against the goods.

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Sale not generally rescinded by lien or stoppage in transit : According to

section 54:
1. Subject to the provisions of this section, a contract of sale is not
rescinded by the mere exercise by an unpaid seller of his right of lien or
stoppage in transit.
Explanation: Other than the provisions given in this section, mere exercise
of right of lien or stoppage in transit does n ot rescind the contract of sale.
2. W here the goods are of a perishable nature, or where the unpaid seller
who has exercised his right of lien or stoppage in 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 the price, re -sell 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 the 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, i f
any, on the re-sale.
Explanation: If the goods are of perishable nature and the seller gives
reasonable notice to the buyer for the payment of price and that incase of
non-payment shows his intention of resale by exercising his right of lien or
stoppage in transit; in such a case the buyer must pay the price and ask for
deliver within the time mention in notice. If buyer fails, the seller can resell
the goods and he can also claim damages from the original buyer for the
breach, if the resale price is higher, the seller shall keep the profit and buyer
cannot claim any profit. Conversely, if unpaid seller has not given such notice
to the buyer, then the seller is entitled to claim profit earned from resale and
the seller losses hi s right to claim damages for breach from the buyer.
Example: Ali sold 50 kg Meat to Ahmed. Ali asks Ahmed to not to deliver
meat unless price is not paid till tomorrow. Ahmed failed to pay price and time
elapsed. Ali resold the goods to Amjad. This is a valid sale by Ali. Ali may
also claim damages from Ahmed for the breach of contract.
3. W here in unpaid seller who has exercised his right of lien or stoppage in
transit re-sells the goods, the buyer acquires a good title thereto as
against the original buyer , notwithstanding that no notice of the re -sale
has been given to the original buyer.
Explanation: In such a case where seller has resells the goods; the buyer
acquires good title to the goods against original buyer even if the seller has
not given notice of resale to the original buyer . The Original buyer is neither
entitled nor he can sue for recovery of goods.
Example: Akram sold and delivers a car to Ahmed. Ahmed became insolvent.
Akram exercises his right of stoppage in transit and regains the car. Later on,
Akram sold car to Arshad. This is a valid sale and Arshad has good title over
the goods.
4. W here the seller expressly reserves a right of re -sale in case the buyer
should make default, and, on the buyer making default, re -sells the
goods, the original contract of sale is thereby rescinded, but without
prejudice to any claim which the seller may have for damages.
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LLB (HONS) 2nd SEMESTER
GSLC, HYD.
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Explanation: W here the right of resale is reserved expressly by the contract

of sale incase of buyer’s default; in such a case resale of goods by the seller
on the default of buyer rescinds the original contract of sale, but such
rescission of original contract does not defeats the seller’s right to claim
damages occurred by such breach.
Example: Ali contracted for the sale of certain goods to Ahmed by expressly
reserving his right of disposal. Ahmed failed to pay, then Ali resold the goods
to Ayan. The contract between Ali and Ahmed is rescinded with the resale. Ali
may claim damages from Ahmed for any damages.
Suit for breach of the contract
This chapter of the act relates to suits for the Breach of a Contract. It can be
divided into 3 parts:
 Seller’s Remedies against Buyer – Sections 55 and 56
 Buyer’s remedies against Seller – Sections 57, 58 and 59
 Remedies available to both buyer a nd seller – Sections 60 and 61
Suit of price: According to section 55:
1. W here under a contract of sale the property in the goods has passed to
the buyer and the buyer wrongfully neglects 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.
Explanation: This subsection applies to a case where the property in the
goods has been passed to the buyer and the buyer intentionally refuses or
neglects to pay as agreed in the contract; the seller may sue buyer for price”.
Example: A sells and delivers certain goods to B for a price of Rs. 5,000/ -. B
acquires the goods but refuses or neglects to pay for them. A may file a suit
for price against B.
2. W here under a contract of sale the price is payable on a day certain
irrespective of delivery and the buyer wrongfully neglects or refuses to
pay such price, the seller may sue him for th e price although the
property in the goods has not passed and the goods have not been
appropriated to the contract.
Explanation: This subsection applies to a case where payment was agreed
to be paid on a certain day, and the buyer refuses or neglects to pay on that
day; in such a case seller may sue against buyer for the price of goods after
the elapse of that fixed day irrespective of the fact that the property in the
goods has not been passed to the buyer.
Example: Ali agrees to sell certain goods to Ahmed for a price of Rs. 5,000/ -
to be paid within a week without delivery of the goods. Ahmed intentionally
neglects or refuses to pay for the goods within a week and time elapses. Ali
may file a suit for price against Ahmed even though the goods are not
delivered.
Damages for non-acceptance: According to section 56, “where the buyer
wrongfully neglects or refuses to accept and pay for the goods, the seller may
sue him for damages for non-acceptance.

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Explanation: This section applies to a case the contract of sale has been
made, but afterwards the buyer intentionally neglects or refuses to accept
and pay for them, as a result damages incurred to seller; the seller may claim
such damages occurred from the buyer by filing a suit for damages”.
Measure of damages: There is no specific rule in this section for
measuring the damages, so in order to measure damages we refer the
section 73 of Contract Act, 1872 which lays down the rules that “if there is an
available market for the goods in question, measure of damages are to be
ascertained by the difference between contracted price an d market rate on
the day at which goods were to be delivered; and if no market is available for
the goods, the measure of damages is estimated loss directly and naturally
resulting.
Example: Ali agrees to sell certain goods to Ahmed, to be delivered and paid
for on 1 s t January 2019. On the agreed day Ahmed refuses or neglects to
accept and pay for the goods . Ali sues against Ahmed for damages that arose
to him due to non-acceptance of the goods.
Damages for non-delivery: According to section 57, “w here the seller
wrongfully neglects or refuses to deliver the goods to the buyer, the buyer,
may sue the seller for damages for non-delivery”.
Explanation: This section provides remedy to buyer against the seller and
applies to a case where seller and the buyer ent er into a contract, but at the
time of execution of contract, the seller intentionally neglects or refuses to
make delivery of the goods which result in damages to the buyer; in such a
case the buyer may sue against seller for damages incurred to him due to
non-delivery. Rules for measurement of damages in already mentioned above
in the comments of section 56 of this act”.
Example: A, a distributer enters into a contract with B, a shoe -seller that, A
shall deliver 10 pairs of shoes for 10,000/ - (1000 each) to B. B was going to
sell the same shoes to C for Rs. 11,000/ - (1100 each). A neglects or refuses
to deliver shoes to B for which B suffered loss of Rs. 1000/ - (100 per pair of
shoes). B can sue for damages against A due to non -delivery.
Specific performance: According to section 58, “ Subject to the provisions of
Chapter II of the Specific Relief Act, 1877, in any suit for breach of contract
to deliver specific or ascertained goods, the Court may, if it thinks fit, on the
applications of the plaintiff, by its decree direct that the contract shall be
performed specifically, without giving the defendant the option of retaining
the goods on payment of damages. The decree may be unconditional, or
upon such terms and conditions as to damages, payment of the pric e or
otherwise, as the Court may deem just, and the application of the plaintiff
may be made at any time before the decree ”.
Explanation: This section gives remedy to buyer against seller and applies to
a case where seller commits breach of the contract for delivery of specific or
ascertained goods; the buyer can seek assistance of Court to ask the seller
for specific performance. The court may pass a decree for just performance
of contract or may ask for damages or payment of the p rice in addition to
performance.

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Example: Ali agrees to sell 10 sacks of sugar to Ahmed against a certain

price. Later on, at the time of delivery Ali refuses to deliver sugar
alternatively commits breach of the contract. Ahmed filed a suit for specific
performance of the contract.
Remedy for breach of warranty: According to section 59:
1. “W here there is a breach of warranty by the seller, or where the buyer
elects or is compelled to treat any breach of a condition on the part of
the seller as a breach of warranty, the buyer is not by reason only or
such breach of warranty entitled to reject the goods; but he may :
a. set up against the seller the breach of warranty in diminution or
extinction of the price; or
b. sue the seller for damages for breach of warranty.
Explanation: This subsection deals with a case where there is breach of
warranty on the part of seller, or where the buyer elects to treat breach of
condition as a breach of warranty in accordance with section 13(1) of this Act;
in such a case the buyer cannot reject the goods, but he has two options: a)
he may claim diminution or extinction from the price if the damage occurred
by breach of warranty is less than the price, he may refuse to pay the price if
damage equals the price, or if damage occurred exceeds the price then he
may refuse to pay and claim the exceeding amount. b) Second option is that
the buyer may pay price of goods and sue the seller for damages for breach
of warranty.
2. The fact that a buyer has set up a breach of warranty in diminution or
extinction of the price does not prevent him from suing for the same
breach of warranty if he has suffered further damage.
Explanation: This subsection provides that, if the buyer has claimed
diminution or extinction of the price of the goods due to damages arose out of
breach of warranty, merely filing such suit does not prevent the buyer for
filing another suit for breach of warranty if further damage is suffered to him”.
Repudiation or contract before due dat e: According to section 60, “w here
either party to a contract of sale repudiates the contract before the date of
delivery, the other may either treat the contract as subsisting and wait till the
date of delivery, or he may treat the contract as rescinded and sue for
damages for the breach”.
Explanation: This section embodies the doctrine of breach of anticipatory
breach of contract whereby either party repudiates the contract of sale before
the date of delivery; the party not in default may either choose to keep the
contract alive till the date of delivery by not accepting the repudiation of the
defaulting party (example No. 1), or he may treat the contract as repudiated
and sue for damages (example No. 2). If the contract was kept alive and at
the time of performance the party not in default performs his part and the
party in default refuses or is unable to perform his part, the defaulter party
would be discharged and the position will be as if there was no repudiation of
the contract before due date.
Example No. 1: A agrees to sell goods to B against a certain price on a
certain day. A repudiates the contract before that day, but B does not accept
the repudiation and keeps the contract alive. On the date of performance, A
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delivers the goods but these are not accordi ng to the specifications provided
by B. In this case B may reject the goods. A will not be able to avail any
remedy OR B may accept the goods and treat the breach of condition as a
breach of warranty and recover damages from A.
Example No. 2: A agrees to deliver 10 sacks of sugar to B against a price on
a certain day. B repudiates the contract before the date of performance. A
need not to wait till date of performance and he may repudiate the contract
and claim damages arose due to such breach by B.
Interest by way of damages and special damages : According to section 61:
1. Nothing in this Act shall affect the right of the seller or the buyer to
recover interest or special damages in any case where by law interest
or special damages may be recoverable, or to recover the money paid
where the consideration for the payment of it has failed.
2. In the absence of a contact to the contract, the Court may award
interest at such rate as it thinks fit on the amount of the price :
a. to the seller in a suit by him for the amount of the price --- from the
date of the tender of the goods or from the date on which the price
was payable;
b. to the buyer in a suit by him for the refund of the price in case of a
breach of the contract on the part of the seller --- from the date on
which the payment was made.
Explanation: This section saves the right which a party may have to recover
interest of special damages, or to recover money on the failure of
consideration. The court may award interest to the seller if the seller is
entitled to recover the price of the goods and the interest will be calculated
either from the date of delivery of goods or from the date on which the price
was payable. The court may also award interest to the buyer on the price he
had paid in advance but later seller committed breach of contract. Interest
will be calculated from the da te when the buyer had paid money.

Definitions
Bill of exchange: It is a document used to require sum of money upon
receipt of goods or at specified day after receipt of goods.
Bill of lading: It serves as a receipt when the goods shipped arrives at
destination. It is an evidence and proof of shipment.
What is estoppel?
It is derived from the word “stop”. It represents “any statement or conduct led
the buyer to believe that seller has authority”. The ownership is transferred
by the seller even if he i s not the owner of the goods, if the owner does not
stop the seller to sale and afterwards the owner cannot get up his own title to
the goods and claim them from the purchaser.
Illustration: A, an owner of cloth shop employs B. C comes to buy cloths. C
has assumed B as the owner of shop and B thereby executes a sale. The sale
is valid as A has not stopped B to sell.

AHSAN ALI (44)

LLB (HONS) 2nd SEMESTER
GSLC, HYD.