This article has been written by Parul Chaturvedi pursuing LLB from DR. RML law college affiliated to Bangalore and Karnataka State Law University (KSLU) Bangalore.
The Sales of Goods Act, 1930 considers the fundamental standards of contract and makes a clear scrutiny of commercial transactions. Thus, the common regulations applicable to contracts are additionally relevant to contracts of sale of goods and in some distance as they are now non contradictory with the categorical provisions of the Sale of Goods Act. The sale of goods dates to long back when it used to be found by:
Williston that the: “Sale of goods is an agreement wherein the seller transfers the property in goods to the buyer for a price”.
In Roman law, “Sale” is slated to be “an agreement whereby one individual agrees to transfer to another the absolute ownership of something for consideration”.
Benjamin said, “to constitute a valid sale, there need to be a concurrence of following the factors in which the Parties are ready to contract with mutual consent, A thing, absolute or usual in which the property is transferred from the seller to the buyer.
With a view to construct a sale, it is essential that an agreement between the parties for the transferring of title of goods, is presume to be in the scope of the parties to the contract with a valid support of money consideration and actual transfer of the property in the goods within a transaction.
Agreement of Offer of Goods
Section 4(1) of the Indian Sale of Goods Act, 1930 describes the agreement of offer of goods in the consecutive aspect: “A agreement of offer of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.”
According to Sec 5(1), agreement of offer can also grant for Immediate delivery of the goods, or Delivery of goods at some future time or delivery of goods through installments. There may additionally be Immediate payment of price or Payment of price in may provide for future or Payment of price may be provided to be made in installment.
Sec 5(2) provides that, an agreement of an offer might be made in writing or made by means of word of mouth (oral) or made partly in writing and partly through word of mouth or Implied from the conduct of the parties.
Goods sold off or bought on the counter in a shop is an instance of absolute sale
In a conditional contract of sale, the property in the goods doesn’t go to the buyer promptly yet it will be transferred to fulfill the contentment of specific conditions.
The terms ‘contract or agreement of offer’ is a general term and it incorporates a deal and a consent to sell. Where the seller assigned the proprietorship rights to the buyer instantly on making the agreement, it is an ‘agreement of offeror an offer.’ when the possession rights are assigned on some future date depending upon the satisfaction of certain conditions, then it is called ‘an agreement to sell’.
Fundamentals of contract or an agreement of an offer
- A contract
- Between two parties (i.e. the buyer and the seller)
- To transfer or agree to transfer
- The property in goods
- From the seller to the buyer
- For a price (i.e. money consideration)
- A contract– A agreement of an offer is a special type of agreement. It is called a Consensual, Bilateral and Commutative contract.
- Consensual contract– The contract implies an agreement enforceable by law. Therefore, all the fundamental elements of a valid contract must be present in a contract of sale. There must be free consent, there must be some consideration and the object must be legitimate.
- Bilateral contract– The property in goods needs to transfer from one person to another i.e. the seller and buyer must be persons.
- Commutative contract– Is one in which the things given, or act done by one party are regarded as equivalent to money paid or act done by the other.
- Contract of insurance– In which the equivalent consists of the chances of gain or loss to the respective parties depending upon uncertain events.
Case Law: In re Graff v Evan- In this case the defendant was the manager of a club. The club was unauthorized for auction of liquors, inspite these it was provided by the manager to the individual members at the assigned cost. This was held to be not a sale deal but allocation of liquor.
- Two Parties: To create a legitimate agreement of offer, there must be two party’s dealer and purchaser. The dealer and purchaser must be two distinct persons because an individual can’t purchase his own goods.
Case Law in State of Gujarat v. RamanLal & Company- On disintegration of an association firm, the assets of the firm were divided among the associated partners, the Sales Tax Officer needed to impose this tax transaction. It was discovered that it was not a deal anymore. The accomplices being the joint proprietors of those assets cannot be both dealers and purchasers. In any case a part-proprietor can sell his share to another part-proprietor.
- Transfer of property- To represent a legitimate sale, it is important that the vendor should transfer or consent to transfer the property in goods to the consumer. Section 2(11) of the Act characterizes the property to mean “the general property in goods, and not merely an exclusive property”.
Case Law in Elects B Merril v. James W Hordson- It was held that the delivery of food or drink to customers did not partake of the character of an offer of goods.
- Goods According to Sec. 2(7), “ ‘Goods’ means each kind of movable assets other than actionable claims and money and consists of stocks and shares, growing crops, grass and things connected to or farming part of land which are agreed to be severed before sale or under the agreement of offer.” Trademarks, copyrights, patent rights, goodwill, electricity, water, gas are all goods. Money, actionable claims and immovable property are not included in the sale offer in the prescribed meaning of Section 2(7) of the Act.
Case Law In re Associated Hotel of India Ltd the Supreme Court held that there is no deal when food and drinks are offered to guests in the hotel. In Northern India Caterers v. Lt Governor of Delhi, it was found that the foods provided to the visitors in the club cannot be called a sale deal.
According to Sec 6 of the Act: (1) The goods, which structure the subject of an agreement of an offer can be either existing goods, owned or possessed by the vendors, or future goods.
Characterization of Goods according to Sec 6 Goods, which form subject matter of an agreement of an offer for an existing goods which are possessed by the vendor or Possessed by the seller the future goods or Contingent goods. Thus, goods may be classified into various types as shown below:
Price- Implies the cost concerned for a sale of the goods as per [Sec. 2(10)]. It is a must for an agreement of an offer or an agreement to sell. Price defines a cost in transaction and is payable in terms of money.
Illustration: A consents to trade with B 100 quarter of grain at £ 2 for per quarter for 52 bullocks esteemed at 6 for every bullock and pay the difference in cash. It was held that the agreement was an agreement of offer. Consequently, a transaction will be an agreement of offer regardless of whether it is called by some other deal given there is a transfer of property at a cost.
‘Stipulation’ signifies “a requirement or a particularized goods in an agreement”.
In an agreement of offer of goods, stipulation alludes to portrayals made by the purchaser and the vendor correspondingly as a piece of negotiation between them before they go into a contract or an agreement.
If no portrayals or stipulations the principle of caveat emptor implies i.e. ‘let the buyer beware’.
Types of stipulations
A stipulation is a condition which is important for the contract. A stipulation is a warranty if it is collateral to the main intent of the contract.
Stipulation as to Time
As per Section 11, stipulations as to time of installment are not regarded to be the pith of an agreement of an offer.
Case Law in Aron & Co. v Comptoir Wegmont
There was an offer of sale of goods c.i.f. Antwerp to be shipped in October. The vendor was not to reject delivery even if there was any difference in the type or value or grade specified. The goods couldn’t be transported till November by virtue of strike at the port. It was held that the purchaser could decline to take delivery of the goods.
Condition and Warranty
A stipulation in an agreement of offer could also be either a condition or a warranty.
Definition of Condition According to Section 12 (2) of the Act,
“A condition is a stipulation important to the main intent for the agreement, the breach of which offers ascend to one side to regard the agreement as denied.
Definition of Warranty According to Section 12 (3) of the Act,
“A warranty is a stipulation collateral to the main intent for the agreement the breach of which offers ascend to guarantee for harms yet not an option to dismiss goods and treat the agreement as denied.” Section 12 (4) has laid down that, “Whether a stipulation depends on an agreement of offer is a condition or a warranty.
In Baldry v Marshall,
A consulted a car seller for the acquisition of a car appropriate for touring purposes. The vendor sold a car saying that it will deliver the needs of a buyer. The car ended up being unfit for touring purposes. It was held that the purchaser can restore the car and get back the cost as well as damages, on the ground of breach of condition. In this case, the contract will not be void if the purchaser demands for a good car.
Distinction Between Condition and Warranty
It is a stipulation that is essential and basic to an agreement or a contract.
It is a stipulation that is auxiliary and subordinate to the warranty.
If the seller breaks the condition the buyer can repudiate the contract. He can also claim damages in certain cases.
If the dealer breaks the warranty the purchaser can abandon the agreement and can either minimize the cost or claim for compensation or both.
A breach of condition might be considered as a breach of guarantee or becomes a breach of warranty.
A breach of warranty can’t be considered or neither it converts into a breach of warranty.
When a condition should to be treated as warranty
Section 13 of the Sale of Goods Act lays down the subsequent two conditions
Waiver by buyer
Where an agreement of offer is subject to any condition to be fulfilled by the vendor, the purchaser may:
- waive the condition; or
- elect to treat the breach of the condition as a breach of warranty.
Under section 3, the performance of a condition or a warranty is excused in the accompanying cases:
Refusal to simply accept performance
The buyer is entitled to accomplishment of a deal contract.
To acknowledge the performance, the buyer makes the contentment of the contract futile. In case if he waives the condition, later he cannot insist on its fulfillment.
Hindrance of performance
According to Sec 53 of the Contract Act, when one party to the agreement is obviated from performing his duty under the agreement by the other party then the contract becomes voidable and such a party may claim damages for any loss sustained due to the non-performance of the contract.
Disabled himself from performing
Where the completion of the agreement becomes unattainable because of the conduct of one of the parties, then the other party can abandon the contract without earning any liability.
Acceptance of goods by buyer
Where an agreement of offer is not severable, i.e., it is unified, and the purchaser has acknowledged the goods or part thereof the breach of any condition is to be treated as a breach of warranty. In this case, Sec. 42 provides that the purchaser is presumed to have accepted the goods.
Impossibility of performances
After the creation of the contract the performance becomes preposterous in such case the performance will be excused on the following grounds as mentioned below:
- By negligence or default of any of the parties to contract.
- By occurrence of the supervening occasion.
- Inability to perform due to conditions outside his ability to control.
- An act is passed by the state, for rendition the performance illicit.
- In instance of two promises when one of the promises is not fulfilled the promiser will have the chance to perform the other promises.
- In case of two promises the promiser has the chance to elect any one of them, if he unable to perform one of the promises he still has the chance to perform other promises.
Express and Implied conditions and Warranties
The conditions and warranties are either:
`Express’ conditions and warranties are those, which have been explicitly agreed upon by the parties at the time of the agreement of offer.
`Implied’ conditions and warranties are those, which the law includes into the contract unless the party’s stipulate hostile. Sec.62 says Implied conditions and warranties might be call off or diverse by an express agreement or by the advancement of dealings or by usage and custom.
The accompanying perception of Lord Justice Denning on account of:
Karsales (Harrow) Ltd. v Wallis is quite significant
In this connection. “It is presently settled that exception provisos of this sort, regardless how generally they are communicated, possibly benefit the party at the time of carrying out the contract”.
Sections 14 to 17 of the Act set out the implied conditions in an agreement of offer.
Are as per the following:
Condition as to title [Sec. 14 (a)]
In each agreement of offer:
- In instance of a deal, the seller has a right to sell the goods.
- In the situation of a consent to sell, the seller has a right to sell the goods during the time when the property is transferred.
Case Laws in Rowland v Divall
P purchased a car from A and used it for several months. later discovered that A had no title to the car as it was a stolen one and P had to return the car to the real owner. It was found that the buyer P can recover the full price from the seller even though he has used the car for several months.
2. Sale by description (Sec. 15)
Where there is an agreement of an offer of goods by description, there is an implied condition that the goods shall correspond with the description.
Meaning of ‘sale by description’
It may include the following situations: Where the buyer has never seen the goods and buys them based on the description given by the seller.
Case Law in Verley v. Whipp,
The seller says that the machine he is selling is brand new. On delivery it was found to be a used one. The buyer can reject the goods.
3. Sale by sample (Sec. 17)
An agreement of offer is a contract for sale by sample where there is a term in the contract, express or implied, to that effect.
Case Law in James Drummond & Sons v E H van Ingen & Company.,
In this case the buyer can abandon the contract on discovering the defect in the supplied of cloth by the seller.
4. Sale by sample as well as by description (Sec. 15)
The buyer can repudiate the contract on finding that the goods supplied correspond with the sample but not match with the description. In case when goods sold as per mentioned sample and description then both should match corresponding item.
Case Law in Wallis v Pratt,
In this case, the buyer could recover loss, as there was a breach of condition on contract for sale of seeds referred to as `Common English Sainfoin’ the seeds supplied to the purchaser were of a different quality.
5. Condition as to quality or fitness [Sec. 16 (1)]
In an agreement of offer there is no implied warranty or condition as to the quality or fitness for any precise motive of items supplied. The usual precept is caveat emptor, i.e. consumer beware, the client ought to purchase the items after fulfilling himself that they will serve his purpose. The first exception to the rule of caveat emptor is that the place the buyer, expressly or by way of implication, makes regarded to the seller the unique cause for which the items are required, so as to exhibit that consumer depends on seller’s ability or judgment and the items are of a description which it is in the path of the seller’s commercial enterprise to grant (whether he is the producer or producer or not), there is an implied situation that the goods shall be moderately fit for such purpose.
Case law in Priest v Last,
The purchaser bought a hot water bottle from a chemist. It burst and harmed her wife while using. It was found that the implied condition as to fitness was broken and the seller was liable for loss.
6. Sale under patent or trade name
Sometimes a buyer may rely more on the trade name of an article than the judgment of the seller. Provision of Sec. 16 (1) provides that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose. Example A person buys ‘Aspro’ to get relief from severe headache, if he does not get any relief, he cannot avoid the contract and the seller of ‘Aspro’ cannot be held liable.
7. Condition as to merchantability
Where goods are brought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality.
[Sec.16 (2)]. Even goods sold under a patent or trademark must be of a merchantable quality.
Case Law in Mareli v Fitch and Gibbons
A buyer bought a Stone’s Ginger Wine. While he was attempting to draw its cork with a corkscrew and with due care, the bottle broke off and injured the hand of the buyer. It was held that the bottle was not of merchantable quality, so the seller was liable. Effect of buyer examining goods If the buyer has examined the goods there shall be no implied condition with regard to defects, which such inspection ought to have revealed. However, the implied condition as to merchantability will continue to apply so far as latent defects in the goods are concerned, since such defects cannot be discovered by ordinary examination of the goods.
Subject to the contract to the contrary, following are the implied warranties in an agreement of an offer of goods:
- Warranty of quiet possession
Unless the circumstances are such as to show a different intention there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods [Sec 14(b)].
- Warranty of freedom from encumbrance
That the goods shall be free from any charge or encumbrance in favour of a third party not declared of known to the buyer before or at the time when the contract is made [Sec. 14 (c)].
- Warranty as to quality or fitness by usage of trade an implied warranty or condition
An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade [Sec. 16 (3)].
Case Law in Jones v Bowden
Where drugs were sold by auction and where it is a usage of trade to disclose beforehand any sea-damage such disclosure must be made. In case no such disclosure has been made and the goods are found to be defective, it will be taken as a breach of warranty.
- Warranty to disclose dangerous nature of goods
Where the goods are dangerous, and the seller knows that the buyer is ignorant about the dangerous nature of the goods, the seller should warn the buyer about the probable danger otherwise he will be liable for damages for the injury caused to the buyer because of the dangerous quality of the goods.
Effect of Breach Of Condition
Sec. 13 lays down that unless the buyer waives condition, the breach of condition entitles the buyer to rescind the contract. The buyer may at his option treat the breach of condition as a breach of warranty also and claim only damages.
[Sec 57]-specific performance of contract.
[Sec 28] If the aggrieved party is a seller, in appropriate circumstances, he can sue for the price or claim damage for non-acceptance of the goods.
[Sec 50 & 55] Effect of Breach of Warranty
In case of breach of warranty, the buyer cannot repudiate the contract. In terms of the provisions of Sec 59, he may of course, set up the breach of warranty in diminution or extinction of the price and may bring an action against the seller and claim damages for the breach.
So as to establish a deal, it is vital that there ought to be a contract between the parties for the purpose of transferring the title of goods, which surmises limit of the parties to contract, the backing of money the arrangement of conditions and warranties are given in the Sale of Goods Act, 1930 so as to ensure the purchasers in the event of any extortion by the dealer. Be that as it may, it is seller’s obligation, in any case, to search for the conspicuous imperfections and enquire about the quality of the item before going into an agreement of offer of the seller since a seller can’t be held liable for a buyer off-base decision.
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