Law of Contract-II

Sale of Goods Act 1930

 TRANSFER OF TITLE BY NON-OWNERS
Sections 27-30

• The general rule is that only the owner of goods

can transfer a good title. No one can give a
better title than he himself has. This rule is
expressed by the maxim "Nemo dat quod non
habet" which means "that no one can give what
he himself has not"
• If the seller, therefore, has no title, or a defective
title, the buyer's title will be equally wanting or
defective as the case may be, though he may be
a purchaser – bona fide and for value.
 Continued…….
• Example
• A finds a ring of B and sells it to a third
person who purchases it for value and in
good faith. The true owner, i.e., B can
recover from that person, for A having no
title could pass none the better.
[Faruquaharson v. King (1902) A.C.
324.).
 Exceptions to the Rule
• Sale by Mercantile Agent
• Sale by a Joint-owner
• Sale by a Person in Possession under a Voidable
Contract
• Sale by the Seller in Possession of Goods after Sale -
Where a seller having sold goods, continues in
possession thereof or of documents or title to the goods,
such seller will pass a good title to the (second) buyer, if
that buyer has acted in good faith and without notice of
the previous sale.
• Sale by an unpaid seller - a seller who has exercised his
right of lien or stoppage in transit can, resell the goods
and convey a valid title to another buyer, though no
notice of re-sale has been given to the original buyer.
 DUTIES OF THE SELLER AND
BUYER
• Duty of the seller
• To deliver the goods, in accordance with
the terms of the contract of sale.
• Delivery and payment of price are
concurrent conditions.
• The seller of goods has the duty of giving
delivery according to the terms of the
contract.
 Continued……
• Duty of the buyer
• Pay for the goods;
• Accept delivery; and
• Pay compensation to the seller in case he
wrongfully refuses to accept delivery.
 DELIVERY
• It has been defined as a voluntary transfer of
possession from one person to another..
• Delivery of the goods may, be:
• I. Physical or Actual Delivery
• 2. Symbolic Delivery - e.g., delivery of a
railway receipt properly endorsed, or deliv­ery of
the key of a warehouse;
• 3. Constructive Delivery - only an
acknowledgement by the person in possession
that he holds them on behalf of another.
 Rules regarding delivery

• The seller is not bound to deliver goods till the

buyer applies for delivery in terms of the
contract.
• Place of Delivery - goods sold are to be
delivered at the place agreed for delivery in the
contract.
• Time of Delivery – as per contract otherwise
within reasonable time.
• The expenses of and incidental to putting the
goods into a deliverable state shall be borne by
the seller, as per the terms of the contact.
 Continued……
• Demand and tender must be at a reasonable
hour - What is a reasonable hour is a question of
fact.
• Delivery of Wrong Quantity - Where 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 accepts the goods so
delivered he shall be required to pay for them at
the contracted rate.
 Continued……
• Instalment Deliveries - The buyer is not bound to
accept delivery by instalment, unless otherwise
agreed.
• Delivery to the Carrier or Wharfinger - Delivery
of goods by the seller to a carrier for transmis­
sion to buyer or to wharfinger for safe custody is
prima facie deemed to be a delivery of the goods
to the buyer.
• As regards insurance, the seller’s duty is only to
give sufficient notice to the buyer to enable him
to insure the goods. Alternatively it may be
agreed to send the goods ex-ship.
 Continued……
• Buyer not bound to return rejected goods - when the
goods are deliv­ered to a buyer on sale or return basis
and the buyer refuses to accept them, he is not bound to
return them to the seller, but it is his duty to inform the
seller that he has refused them; otherwise after lapse of
a reasonable time, he will be deemed to have accepted
them.
• Liability of the 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 takes 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 charge for the care
and custody of the goods.
 UNPAID SELLER AND HIS
RIGHTS
• A contract is comprised of reciprocal
promises, in a contract of sale, if seller is
under an obligation to deliver goods; buyer
has to pay for it. In case buyer fails or
refuses to pay, the seller, as an unpaid
seller, shall have certain rights.
 Who is an unpaid seller
• An unpaid seller of goods is a person who
has not been paid the whole of the price or
to whom the whole of the price has not
been tendered. The term "seller" includes
an agent of the seller.
 Continued…….
• The seller of goods is deemed to be an "unpaid
seller" if:
• (a) 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
dishonour of the instrument or otherwise.
 Rights of an unpaid seller

• Rights of an unpaid seller may broadly be

classified under two heads namely:
• Rights against goods
• An unpaid seller has the following rights
against the goods:
• (a) Lien on the goods
• (b) A right of stoppage in transit
• (c) A right of re-sale
 Continued…..
• Rights Against the Buyer Personally
• An unpaid seller, besides his rights against
goods, has the following rights against the
buyer personally:
• (i) Right to sue for the price; and
• (ii) the right to sue the buyer for
damages for non-acceptance.
 SALE BY AUCTION
(Section 64)
• In the case of sale by auction the following rules apply:
• When the goods are put up for sale in lots, each lot is
deemed, prima facie, to be the subject matter of a
separate contract of sale;
• At an auction, the sale is complete when the auctioneer
announces its completion by the fall of the hammer or in
other customary manner; until such completion any
bidder may withdraw his bid.
• A right to bid may be reserved expressly by or on behalf
of the seller and where such right is expressly so
reserved, but not otherwise, the seller or any person on
his behalf may bid at the auction;
 Continued……
• Where the sale is not notified to be subject to a right to
bid on behalf of the seller, it shall not be lawful for the
seller to bid for himself or to employ any person to bid at
such sale, or for the auctioneer knowingly to take any bid
from the seller or any such person, Any sale
contravening this rule shall be treated as fraudulent;
• The sale may be notified to be subject to a reserved or
upset price;
• If the seller makes use of pretended bidding to raise the
price, sale is voidable at the option of the buyer.
[Thornett v. Haines. 1846, 15 M. & W. 367].