In this blog post, Pramit Bhattacharya, student, Damodaram Sanjivayya National law University writes about the remedies which are available under the Sale of Goods Act in the case of breach of a contract. The post mentions three kinds of remedies. Firstly, those remedies which the seller can avail against the buyer. Secondly, those remedies which the buyer can avail against the seller. And lastly, remedies available to both seller and the buyer.

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Until the year 1930, the law on Sale of goods was governed by Section 76 to 123 of the Indian Contract Act, 1872. But the legislature realized that this was insufficient, and a separate Act was needed to govern the sale of goods. The Sale of Goods Act was introduced in the year 1930, and it was modeled after the English Statute of Sale of Goods, 1893. Three kinds of remedies are mentioned under the Sale of Goods Act, relating to the breach of contract.

  • Seller’s Remedies against Buyer
  • Buyer’s Remedies against Seller
  • Remedies available to both Buyer and Seller

 

Seller’s Remedies against Buyer

There are two types of remedies which the seller has against the buyer. They are:

  • Suit for Price: Section 55[1] of the Sale of Goods Act states two conditions. The first is that when any goods are passed to the buyer under the contract to a sale, and the buyer intentionally neglects payment or refuses to pay for the goods according to the terms stated in the contract, the seller may sue the buyer for the payment of the price of the goods. The second provision states that when payment is due on a particular day, irrespective of whether or not it has been delivered or not, and the buyer is neglecting the payment or refusing to pay for the good, the seller may sue the buyer to recover the price of the goods. In the case the buyer is required to pay the seller partly in kind and partly in cash, if either of the payment is not given to the seller, then he has the right to sue the buyer.parcel11
  • Damage for Non-Acceptance: Section 56 of the Act states that when the buyer is intentionally and wrongfully refusing to accept the goods and pay for the same, the seller may sue the buyer for non-acceptance of goods. The damage is to be calculated on the basis of the principle which has been given under Section 73 and 74 of the Indian Contract Act, 1872.[2] Section 73 of the Contracts Act states that when any breach of contract happens, the party who suffers any loss can recover the amount from the person who breached the contract. The damage which can be recovered is the loss which would have occurred in the usual course and about which the parties knew when the agreed to enter into a contract. When the loss is calculated, the means which existed to remedy the breach will also be considered. The market price of the goods regarding which breach has been done will be ascertained on the basis of the date on which the good was to be delivered. For instance, X and Y entered into a contract for the sale of wheat. X had to deliver 100 bags of wheat to Y on 15th of the month. Y refused to take delivery on 15thand on that day the price of one bag was Rs 5, 000. A suit was filed by X for non-acceptance on 20th of the month and on that day the market price for a bag of wheat was Rs 4,500. For the purpose of the suit, the market price will be considered as Rs 5,000. Following the principle enshrined in Section 55 and Section 63 of the Contracts Act. When a date or time is fixed for the performance of the contract, but due to any reason, some other date is set, that substituted date will be considered for calculating the damage caused. When the seller is required to deliver the goods in installments, and the buyer rejects any one of the installments, the date on which the installment was to be delivered will be considered for determining the damage.

 

Buyer’s Remedies against the Seller

The buyer has three remedies against the seller for breach of contract under the Sale of Goods Act. These are: thediplomat_2016-04-22_19-04-04-386x258

  1. Damages for Non-Delivery: Section 57 of the Act states that if the seller is intentionally or wrongfully neglecting the delivery of the goods to the customer, the customer can sue the seller for damages for non-delivery. In the case where the property in the goods has been passed to the buyer, and the buyers have the right to immediate possession, he gets all the remedies an owner of the goods will get against anyone whose activities are inconsistent with his rights. When the amount of damage is to be calculated, it’ll be done on the basis of the difference between the contract price and the market price on which the damage occurred. In the case where the buyer had paid the money in advance, the date which is to be considered for measuring the damages will be the day on which the payment was made. The buyer can also claim the amount which was used to find an alternate remedy for the breach.
  1. Remedy for Breach of Warranty: Section 59 of the Act states that when there is a breach of warranty on the part of the seller, the buyer is not entitled to reject the goods on that basis, but he may sue the seller breach of warranty in diminution or extinction of the price. The seller may also sue the buyer for breach of warranty in the diminution or extinction of the price. Definition of warranty is given under Section 12 (3) [3]of the Act. Section 13 states that if any condition is to be fulfilled by the seller, the buyer may consider the breach of condition as a breach of warranty. In this case also, the buyer does not have the right to reject the goods. This section does not deal with the cases of fraudulent misrepresentation on the part of the seller, which will give the buyer to set aside the contract. This sections also does not deal with cases where the buyer can set aside a contract under the terms expressly provided by the contract on breach of warranty. The buyer cannot invoke this section in cases where the buyer has lawfully rejected the goods. The buyer can proceed under Section 57 or Section 61[4] of the Act to recover the purchase price along with the interest. In a case where the warranty is given by the seller with regards to the quality of the product, and the warranty has been breached, the amount of the damages will be determined on the basis of worth of goods at the time of delivery, and what should have been its actual worth according to the contract.[5] For a breach of warranty, it is required that the buyer relied upon the warranty given by the seller, and had acted reasonably to minimize the damage caused.
  1. Specific Performance: Section 57 of the Act states that subject to provisions mentioned under Specific Relief Act, 1877,[6] in a case of breach of contract, the Court may, on an application by the plaintiff direct the defendant that the contract should be performed specifically. The decree passed by the court may be unconditional, or s to terms and conditions as to price, amount of damages, etc. As stated above, previously the provision which related to the sale of goods were governed by the Contracts Act. The Contracts Act did not provide for this kind of remedy. The Specific Relief Act was introduced in 1877 so that equitable remedy could be made available to the aggrieved party. This section provides a solution only to the buyer. The seller cannot file an application under Section 58 to enforce a specific performance, because this section provides no rights to the seller, and only on request of the buyer can specific relief be provided.

Remedies available to both Seller and Buyer

The buyer and seller have two remedies while dealing with goods under the Sale of Goods Act. These are:

  1. Suit for Repudiation of Contract before the Date or Anticipatory Breach: Section 60 of the Act states that if any party renounces the contract before the delivery of the goods, the other party may wait till the date of delivery of the goods or may treat the contract as annulled and claim for damages. This provision is not a part of the English Law on which the Indian Law is based. The party not in default can choose to keep the contract alive by not accepting the repudiation of the defaulting party. In such a scenario, if at the time of performance of the contract, he refuses to perform his part or is unable to perform his part, the defaulter party would be discharged, and the position will be as it would have been as if there was no repudiation of the contract before the date of the contract. For example, P is a seller and Q is a buyer. Q repudiates the contract before date, but P does not accept the repudiation and keeps the contract alive. On the date of performance, P delivers the products. But these are not according to the specification of Q. in this case Q may reject the goods. P will not be able to avail any remedy. Or Q may accept the goods and treat the breach of condition as a breach of warranty and recover damages from P.a496
  1. Interest by way of Damages and Special Damages:Section 62 of the Act states that the buyer or seller can recover special damages where by law special damages or interest may be recoverable. There is a limitation to this remedy. The parties should have contemplated that a particular loss may occur if the contract is breached in any manner. And also, the particular loss must have taken place after the violation of the contract. The Interest Act,[7] which was introduced in 1839, states that interest also shall be paid by way of damages in certain cases. The point which is to be noted here that the seller can only claim interest when he is entitled to recover the price. When the seller is suing only for damages for breach of contract, he cannot claim any interest. The same principle applies in the case of the buyer also. He cannot claim an interest if he is suing the buyer for breach of warranty.

 

 

 

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Footnotes:

[1]http://comtax.up.nic.in/Miscellaneous%20Act/the-sale-of-goods-act-1930.pdf

[2]http://comtax.up.nic.in/Miscellaneous%20Act/the-indian-contract-act-1872.pdf

[3]  A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

[4] Interest by way of damages and special damages

[5] Dingle v Hare (1859) 7 CBNS 145

[6]http://displacementsolutions.org/wp-content/uploads/THE-SPECIFIC-RELIEF-ACT-1877.pdf

[7]http://lawcommissionofindia.nic.in/51-100/report63.pdf

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