Chapter 4 Sale of Goods

Question 1

law relating to sale of goods contained in which act

Answer 1

sale of goods act 1930, formerly Chapter 7 of Indian Contract Act 1872

Question 2

what legal principles and provisions are applicable to contracts for the sale of goods?

Answer 2

general provisions of Indian Contract Act as long as not inconsistent with express provisions of sale of goods act

i.e. if there is a breach of contract of sale, measure of damages is what is prescribed in s73 and 74 of the contract act

Question 3

what are special features of contracts of sale not common to all contracts and that the general law of contract is not concerned with?

Answer 3

• implied conditions or warranties
• passing of ownership to buyer
• circumstances of buyer acquiring good title
• special duties of seller and buyer wrt goods and price
• rights of unpaid seller
• remedies of buyer if goods are not delivered to them

Question 4

expressions used but not defined in sale of goods act, but defined in the contract act, have what meaning?

Answer 4

those assigned to them in the contract act

Question 5

define contract of sale

Answer 5

includes both sale and agreement to sell, whereby the seller transfers or agrees to transfer the property in goods (as defined by section 2 in SOGA) to a buyer for a price, where property means ‘the right of ownership’ of goods

may be between one part-owner and another and may be absolute or conditional

Question 6

5 essential elements of contract of sale

Answer 6

1. two distinct parties competent to contract, i.e. buyer and seller
2. movable goods in which property is or is to be transferred from seller to buyer (transfer of immovable property not regulated by sale of goods act)
3. price (consideration for contract of sale) must be money, and may be partly in money and partly in goods but NOT wholly in goods
4. transfer of general property (ownership) and not MERELY special property (possession)
5. essential element of a valid contract

Question 7

difference between and relationship between sale and agreement to sell

Answer 7

SALE = property, that is, the right to ownership or title deed, in the goods is transferred from seller to buyer

AGREEMENT TO SELL = transfer of property in goods is to take place at a future time or subject to conditions thereafter to be fulfilled

agreement to sell becomes sale when prescribed time elapses or conditions of transfer are fulfilled

in a sale, seller ceases to be and buyer becomes owner of goods

Question 8

general vs special property in goods

REMEMBER: PROPERTY HERE DOES NOT REFER TO AN ACTUAL PIECE OF PROPERTY, IT REFERS TO A RIGHT TO THE GOODS, EITHER TO OWN/USE

Answer 8

General property in goods means ownership of the goods - e.g. buying a good or asset on the open market

Special property in goods means possession of goods - e.g. use of registered IPR that belongs to someone else

Question 9

define buyer and seller

Answer 9

buyer = person who buys or agrees to buy goods

seller = person who sells or agrees to sell goods

Question 10

how might a contract of sale be made?

Answer 10

1. writing
2. word of mouth
3. partly in writing and partly by word of mouth
4. implied from conduct of parties or course of dealing between parties

Question 11

what essential elements may the contract of sale provide for

Answer 11

1. immediate delivery of goods or immediate payment of price or both
2. deliver or payment by instalments
3. delivery or payment or both shall be postponed

Question 12

distinction between sale and agreement to sell

Answer 12

1. transfer of property - executed contract vs executory contract
2. type of goods - existing and specific goods only vs mostly future and contingent goods
3. risk of loss - buyer in a sale and seller in an agreement to sell
4. consequences of beach - in a sale, seller can sue for price; in AtS seller can only sue for damages
5. re-sale - in a sale, no re-sale without buyer suing for price; in AtS, can resell and buyer can only sue for damages
6. general and special property - sale (contract PLUS conveyance) creates jus in rem and ATS (merely contract) creates jus in personam
7. insolvency of buyer -
8. insolvency of seller -

*4 - once title has been transferred, seller is only entitled to full price of goods. If title not yet transferred, buyer is not owner and therefore not seller is not entitled to price, only damages due to breach

Question 13

explain what happens in case of insolvency of buyer in sale vs agreement to sell

Answer 13

SALE

buyer is legal owner so seller has no right to reclaim goods but can:

1) claim payment through insolvency proceedings
2) exercise right of lien if they have possession, or return goods to official assignee if no lien
3) exercise stoppage in transit (before buyer takes possession)

AGREEMENT TO SELL

ownership has not passed to buyer yet, so:

1. seller can refuse to deliver goods and repudiate contract due to having general property

Question 14

explain what happens in case of insolvency of seller in sale vs agreement to sell

Answer 14

SALE

1. buyer entitled to recover goods from official assignee if goods are identifiable and available

AGREEMENT TO SELL

ownership remains with seller, so:

1. buyer can only claim rateable dividend/damages for breach and not the goods

Question 15

explain jus in rem and jus in personam wrt to sale and agreement to sell + general and special property

Answer 15

In a Sale:

Buyer: Gains general property (full ownership) and has jus in rem over the goods.

Seller: loses general property and has jus in personam (right to sue for the price if unpaid); may still have special property if they hold actual possession

In an Agreement to Sell:

Seller: Retains general property and has jus in rem until ownership passes AND has jus in personam to sue the buyer for damages due to breach of contract (payment)

Buyer: jus in personam, as they can only enforce their rights against the seller (e.g. damages for re-sale) but do not have ownership so cannot assert it against the world. May acquire special property if they have possession of the goods.

jus in personam = personal right against a specific party, not world at large

jus in rem = rights against the whole world

Question 16

define hire purchase agreement

Answer 16

HIRE PURCHASE ACT 1972

is a bailment (NOT cotract of sale) plus agreement to sell wherein

owner of goods lets out goods to hirer or hire purchases on payment of rent in instalments such that when a pre-agreed number of instalments is paid, property in those goods pass to hirer

hirer may return goods at any time without having to pay balance rent

Question 17

how to test whether an agreement is HP or contract of sale

Answer 17

if you give option to terminate contract, is a HP agreement, and if not and is bound to pay the full price, is a contract of sale

Question 18

distinction between sale and HP agreement

write about this in case a case study is asked!

Answer 18

1. time of transfer of ownership
2. position of buyer - buyer is owner; hire-purchaser is bailee
3. termination of contract and payment obligations
4. instalments - in a sale, will count towards full price of goods. In HP, considered rent and not contributions to price until option to purchase is exercised

Question 19

is exchange of goods for goods a sale?

Answer 19

is a barter, not a sale, unless partly of goods and partly of money

Question 20

explain the difference between sale and bailment

Answer 20

sale - property in goods transferred from seller to buyer for a price and buyer can use goods in any way they like

bailment - mere transfer of POSSESSION from bailor to bailee and bailee can deal with goods according to direction of bailor

Question 21

contract of sale vs contract for work and materials

Answer 21

SOGA applies only to the former and not the latter

contract of sale is for the sale and subsequent delivery of goods

contract for work and material is for the exercise of skill and labour of seller, with materials being supplied by seller, buyer or both, and delivery of goods being only subsidiary

Question 22

case of Marcel v. Furriers Tapper

Answer 22

F contracted for the SALE of a fur coat to a customer’s requirements, so it was a sale of goods despite the skilled work and labour involved because the contract was not for the actual CUSTOMISATION of the coat

Question 23

what forms the subject matter of a contract of sale?

Answer 23

goods as defined by section 2of SOGA, that is __________ (define here)

Question 24

how does the SOGA section 2 define goods?

Answer 24

• every kind of movable property other than actionable claims and money
• includes stocks and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale (which may include trees)

Question 25

define actionable claims

Answer 25

claim to any debt or beneficial interest in movable property not in possession of claimant

can only be enforced by action in a court of law

for e.g. debt due from one person to another is an actionable claim and cannot be bought or sold as goods, only re-assigned

Question 26

how may goods be classified?

on the basis of time!

Answer 26

1. existing - comprising specific, ascertained and unascertained/generic
2. future
3. contingent

Question 27

define existing goods

Answer 27

in existence and owned or possessed by seller at time of sale and may be:

specific
ascertained
unascertained/generic

say sale, not time of making contract. these may be different.

Question 28

define specific goods

Answer 28

goods identified and agreed upon AT THE TIME a contract of sale is made, i.e. a particular and specified unit of a good from an indefinite larger lot

goods are not specific if only the source of supply is identified e.g. 500 horses from a stable of 1000

Question 29

define ascertained goods

Answer 29

goods that become ascertained or specifed AFTER a contract of sale is made

Question 30

define unascertained or generic goods

Answer 30

not identified or agreed upon at the time of contracting; defined only by description and may form part of a lot. ownership does not transfer until they become ascertained.

all goods part of a lot are unascertained until the buyer a) agrees to buy one particular unit of the good at time of contract or b) agrees to buy one unit and chooses the specific unit after contract is made

Question 31

define future goods

Answer 31

seller does not possess these at the time of making the contract but will manufacture or procure them subsequently

contract to sell future goods operates as an agreement to sell despite technically being a sale because ownership of a thing cannot be transferred before the thing comes into existence

Question 32

deifne contingent goods

Answer 32

a type of future good, the acquisition of which by the seller depends on a contingency which may or may not happen

e.g. A agrees to sell specific goods to B, which will be delivered to B on the arrival of a particular ship carrying the goods AT A’S ADDRESS. If the ship arrives AT A’S ADDRESS without such goods on board, the seller is not liable, for the contract is to deliver the goods to B should they arrive at A’s address!!!!!!

Question 33

differentiate between contingent and future goods

Answer 33

1. procurement of contingent goods depends upon a contingency whereas it is not so in case of future goods
2. On non-acquisition of contingent goods, the parties are discharged whereas on non-acquisition or non-production of future goods the parties are not discharged.

Question 34

considerations regarding destruction of goods —- ELABORATE ON THIS IN THIS CARDDDDDD

Answer 34

1. perish of specific goods before contract is made - if goods have perished at the time of making the contract without knowledge of seller, or so damaged that they no longer match description in contract, contract is void

The contract is also void in the case of an indivisible lot of specific goods if only a part of the goods has perished at the time when the contract is made.

based on the ground of mutual mistake

2. perish of goods after agreement to sell but before sale - Where specific goods, without fault of seller or buyer, perish before the agreement to sell becomes a sale, the agreement is avoided.

based on the ground of impossibility of performance

Question 35

what kind of goods do the rules regarding destruction of goods apply to?

Answer 35

only to specific goods and not to unascertained goods.

If the agreement is to sell certain quantity of unascertained goods, the perishing of even the whole quantity of goods in the between sale and delivery will not relieve seller of obligation to deliver the goods.

Question 36

define document to title of goods

Answer 36

• document used in the ordinary course of business to prove possession or control of goods
• enables possessor to deal with the goods described in it as if they were the owner
• authorises, either by endorsement or by delivery, (1) possessor to transfer or receive goods represented by it, OR (2) to transfer this right to someone else [Sec. 2 (4)]

Question 37

conditions to be fulfilled by document of title to goods

Answer 37

(1) must be used in the ordinary course of business.

(2) The undertaking to deliver the goods to possessor of the document must be unconditional.

(3) The possessor of the document, by virtue of holding such document, must be entitled to receive the goods unconditionally.

Question 38

instances of documents to title of goods

Answer 38

1. Bill of lading - document which acknowledges receipt of goods on board a ship, signed by the captain or duly authorised representative.
2. Dock warrant - issued by a dock owner, it givs details of the goods and authorises the person holding it to receive possession of the goods on behalf of owner
3. Warehouse-keeper’s or wharfinger’s certificate - issued by a warehouse-keeper or a wharfinger stating that the goods specified in the document are in his warehouse or in his wharf.
4. Railway receipt - issued by a railway company acknowledging receipt of goods; must be presented by the holder or consignee at the destination to take delivery of the goods
5. Delivery order - document containing an order by the owner of the goods asking the holder of the goods to deliver them to a person named in doc

Question 39

define price in a contract of sale

Answer 39

money consideration for sale of goods - not essential for price to be fixed at the time of sale, but it must be payable regardless

Question 40

explain ascertainment of price

Answer 40

Price in a contract of sale may be

(a) fixed by the contract itself, or
(b) left to be fixed in an agreed manner, or
(c) determined by the course of dealing between the parties

if no ascertainment, buyer must pay the seller a reasonable price depending on circumstances of case, not necessarily the market price.

Fixed Price: Clearly stated amount in the contract

Agreed Manner: Price set later based on a method both parties agree upon e.g. third party valuation, based on actual costs incurred by seller

Course of Dealing: Price inferred from previous transactions between the buyer and seller

appropriate price = based on factors such as the cost of materials, labor involved, and the quality of craftsmanship. For instance, if it normally takes several hours to build a similar piece, the seller might charge based on the expected labor costs

Question 41

explain agremeent to sell at valuation

Answer 41

parties may agree to sell and buy goods on the terms that price is to be fixed by the valuation of a third party.

If such third party cannot or does not make the valuation, the agreement becomes void, but if part of or all the goods have been delivered to, and appropriated by the buyer, they shall pay a reasonable price

If the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may sue the party in fault for damages

Question 42

explain the concept of earnest

Answer 42

buyer may give some tangible token of good faith as a guarantee or security for performance of the contract [Howe v. Smith, (1884) 27 Ch. D. 89].

If contract is duly performed, earnest is returned or adjusted against the purchase price (if in the form of money)

If the contract isn’t or cannot be performed due to default of buyer, buyer forfeits the earnest unless otherwise agreed

• small amount of money or another valuable item

Question 43

difference between earnest and part payment

Answer 43

earnest is forfeited if contract goes off due to buyer’s default

however, if there has been a part payment, and the contract goes off through the buyer’s default, the buyer may recover the part payment but remains liable to the seller for damages caused by breach

Question 44

stipulations regarding time in a contract of sale

Answer 44

outlined in section 11

1. those related to time of payment - not of the essence of a contract of sale unless specified or implied in contract
2. those not related to time of payment e.g. delivery of goods - regarded as being of the essence of the contract, so if a time is fixed for the delivery of goods, the delivery must be made at the fixed time, otherwise the other party is entitled to repudiate contract

REMEMBER: in either case, whether time is of the essence of the contract essentially depends on the terms of the contract