Contract of Sale

According to Section 4 of the Sale of Goods Act a contract of the sale of goods is a
contract whereby the sellertransfers, or agrees to transfer, the property in (i.e., ownership of)
goods to the buyer for a price.A contract of salemay be (i) absolute or (ii) conditional, i.e., acc
ording to the wishes of
the parties to the contract.The term “contractof sale” is a generic term. It includes an ‘actual
sale’ as well as an ‘agreement to sell’. Where under a contract ofsale the property in the goods (i.
e., the ownership has passed from the seller to the buyer, the contract is called asale. Where t
he transfer of
ownership is to take place at a future date, or subject to some condition to be fulfilledlater,
the contract is called an agreement to sell. An agreement to sell becomes a sale when the time
elapses or thecondition is fulfilled subject to which the ownership of the goods is to be
transferred.A
has a book. He transfers hisright or ownership to B for Rs.15. There is a sale. Where
A agrees to transfer the ownership of the book to B aftertwo months for Rs.15, this is
an agreement to sell, when the two months expire, it becomes a sale.The maindistinction betw
een a sale and an agreement to sell is that in a sale the buyer
owns the goods, while in an agreementto sell, the ownership does not pass from the seller
to the buyer at the time of the contract. The seller continuesto be the owner until the
agreement to sell becomes an actual sale by the expiry of the stipulated time or onthe
fulfilment of some condition.
Essentials of a Contract of Sale

A valid contract of sale must consist of the following essentials :

(1) Two parties: There must be two parties viz., buyer and seller to constitute the contract.
So where a personbuys his own goods through some agent, there is no contract. However,
a part-owner can sell his share to otherpart-owners.
(2) Goods: Subject matter of contract of sale must be the goods of any kind except
immovable goods.
(3) Transfer of property: Passing of property is necessary and not the physical delivery
of goods.
 (4) Price: Consideration for a contract of sale must be money. If some goods are supplied
as remuneration for workdone or in exchange for some goods, it does not amount to contract
of sale.
(5) Lastly, it must contain all the essentials of a valid contract.
Contract of sale how made. No particular from is necessary to constitute a contract of
sale. It is, like anyother contract, made by the ordinary method of offer by one party and its
acceptance by the other party. Itmay be made in writing or by word of mouth, or partly in
writing and partly by word of mouth. It may alsobe implied from the conduct of parties, or
from the course of dealings between the parties.
Difference between Sale and Agreement to Sell
1. Nature of contract: Sale is an executed contract while an agreement to sell is an
executory contract. Inan agreernent to sell something remains to be done. It shall become sale
only when the conditions ofcontract are fulfilled.
2. Transfer of property: In a sale the transfer of property takes place immediately but in
an agreement tosell, it does not pass to the buyer immediately. As the buyer, in a sale
immediately becomes the owner ofgoods, so the risk also passes to him. But in an agreement
to sell seller still remains the owner so the riskdoes not pass to the buyer and if the goods
are destroyed, the loss will fall on the seller even though theyare in the possession of the
buyer.
3. Creation of right: An agreement to sell creates a ‘Jus in personam’, i.e., a personal
right only againstthe buyer while a sale creates ‘fus in rem’, i.e, right in the goods against
the whole world.
4. Remedies in case of breach: In an agreement to sell, the seller can sue only for
damages for non-performance of contract by the buyer. But in a sale, the seller can sue for
the price of the goods. Inaddition to that he has the right of lien, stoppage in transit and re-
sale.In case of breach of contract of saleby the seller, the buyer can sue for the delivery of
goods or for damages but in an agreement to sell the buyer has onlya personal remedy against
the seller.
5. Consequences of Insolvency: In a sale if the buyer is adjudged insolvent; the seller
must deliver thegoods to the official receiver and can claim rateable dividend like other
unsecured creditors for the priceunpaid on his goods. In an agreement to sell the seller can
refuse to deliver the goods unless paid for thegoods.
In a sale, if the seller is adjudged insolvent, the buyer is entitled to receive the goods from
the official receiver. But inan agreement to sell, if the buyer has made the payment in advance
to the seller, he can only ask for rateable dividendand not the delivery of goods.
Subject matter of Contract of Sale
The subject matter of contract of sale is essentially the goods. Section 2 (7) says that
“goods”. means every kind ofmovable property other than money or actionable claims, it
includes stock and shares, growing crops, and thingsattached to the earth which are to be
removed because of the contract of sate. According to this definition moneyand actionable
claims are not goods and cannot be bought and sold. Money here means legal tender money.
It does notinclude old coins which are sold like goods, e.g., silver rupee coins in our country.An
actionable claim means a debt ora claim for money which a person may have against
another and which he can recover by suit.
Goods may be classified into three types :

(1) Existing goods (2) Future Goods, and (3) Contingent Goods.
(1) Existing Goods are goods which are already in existence and which are physically
present in someperson’s possession and ownership. Existing goods may be either (i) Specific
and Ascertained or (ii) Genericand Unascertained.
(i) Specific goods are those goods which are identified and agreed upon at the time of
the contract ofsale; i.e., a particular painting by a painter, a horse pointed out and recognised
as separate from otherhorses in a stable. The term Ascertained goods is used in the same
sense as Specific Goods.

(ii) Generic or Unascertained Goods are those goods which are not specifically identified but ar
e indicatedby description. If A agrees to supply one bag of wheat from his godown to
B, it is a contract relating tounascertained goods because it is not known which bag will be
delivered. As soon as a particular bag isseparated from the lot and making or identified for
delivery it becomes specific goods.
(2) Future Goods are goods which the seller does not own or possess at the time of the
contract, butwhich he will manufacture or produce or acquire after the making of the contract.
For example, A agree to sellto B all the oranges which will be produced in his garden next
year. This is an agreement for the sale offuture goods.
(3) Contingent goods are those goods which the seller will acquire on the happening of
a contingency. Anagreement to sell contingent goods can also be made. For example, A’s
father has a rare copy of bookwhich is out of print. A hopes to get it on his father’s death.
A agrees to sell it to B for Rs.10,000 evenbefore his father’s death. This is an agreement for
the sale of contingent goods.
Perishing of Goods: If in a contract for the sale of specific goods, the goods have,
without the seller’sknowledge, perished at the time when the contract was made, the contract
is void. Where A sold 700 bagsto B, but only 591 bags were in existence at the date of
contract, the remaining having been stolen. Inthis case B cannot be compelled to accept the59
1 bags.

The Price: Price, which means money consideration for a sale of goods, constitutes the
essence of a contract of sale. It may be money actually paid or promised to be paid accordingly
as the agreement is forcash sale or credit sale. If consideration other than money is given,
it is not a sale.In an agreement to sellwhen the seller becomes insolvent the only remedy avail
able to
buyer is to claim for rateable dividend if the buyerhas paid the price. But in a sale if seller
becomes insolvent, the buyer can recover the goods from the liquidatorbecause the ownership
in goods has passed to him.The price may be fixed by the contract or may be determined byt
he course of dealing between the parties. In the absence of either of these provisions the buyer m
ust pay areasonable price, the amount of which is determined by the facts of each particular c
ase.

Sale and contract for work and materials. A contract of sale must be distinguished
from a contract forwork and materials. The Sale of Goods Act applies to the former and not
to the latter. A contract of salecontemplates the delivery of goods whereas a contract for work
and materials involves exercise of skill and labour by one party in respect of materials
supplied for another, the delivery of goods being onlysubsidiary or incidental.
Earnest or Deposit Money
An earnest money is some amount which the buyer pays to the seller at the time of the
contract as a token of goodfaith, and as a guarantee that he will fulfill his contract. If he fails
to fulfil the contract, the earnest money is forfeitedby the seller, but if he fulfills the contract
the earnest or deposit will be treated as part-payment of the price, onlythe balance being
required to be paid to make up the full price.
Sale and Hire-Purchase Agreement
A hire purchase agreement is one under which a person takes delivery of goods promising
to pay the price by a certainnumber of installments and, until full payment is made, to pay
hire charges for using the goods. It is in fact bailmentfor hire with an option to the hirer to
buy the goods in his possession on making the full payment. Until the fullpayment is made
the agreement remains a contract of hire and the hirer can return the goods to the owner and
theowner can get them back, as the ownership of the goods remains with him. When the hirer
pays full price he buys thegoods. The essence of hire purchase agreement is that there is no
purchase or agreement to purchase, but only anoption is given to the hirer to buy so that when
he has paid the full price it becomes a sale and he becomes the owner.In a sale, on the other
hand, the property passes to the buyer immediately on making the contract even if the payment
ofthe price is to be made by instalments.The transaction of hire-
purchase protects the owner against the insolvency ofthe buyer,
for if the buyer becomes insolvent or fails to pay the instalments, the seller has the right to
take the goodsas owner and treat all the money already received as hire-charges. Again, until
the full price is paid and theagreement remains that of hire, no title will pass even to an
innocent and bonafide parties.
Sale and Bailment
Bailment is the delivery of goods from one person to another upon a condition that he
shall return the goods to thebailor when his purpose is accomplished. Bailment may be with
or without consideration. Sale is delivery of goods inreturn of monetary payment and there
is no provision of return of those goods. In a sale, the buyer becomes theabsolute owner of
goods but in bailment, the question of transfer of ownership does not arise at all.

Agreement to sell at valuation. According to section 10 the parties may agree to sell and
buy goods on theterms that price is to be fixed by the valuation of a third party. If such third
party cannot or does not makesuch valuation, the agreement becomes void. But if the goods
or any part thereof have been delivered toand appropriated by the buyer, he shall pay a
reasonable price therefore. If the third party is preventedfrom making the valuation by the
fault of the seller or buyer, the party not in fault may maintain a suit fordamages against the
party in fault.
CONDITIONS AND WARRANTIES
The parties may enter into a contract with any terms they like. In the case of sale of
goods, the ordinary maxim isCAVEAT EMPTOR which means let the Buyer Beware! The do
ctrine, of caveat emptor means that, ordinarily, a buyermust buy goods after satisfying
himself of their quality and fitness. If he makes a bad choice he can not blame theseller to
recover damages from him. It is no part of the seller’s duty to point out the defects in the
goods he isselling. But the buyer may want to be sure of the quality and fitness of the goods
and may make known to the seller’sskill or judgement, and buys them depending upon the
representations made by the seller. Such representation mayrank either as conditions or
warranties. In such a case the principle of caveat emptor will not apply, and the contractwill
be subject to the condition or warranty.
Caveat Emptor
According to the doctrine of ‘Caveat Emptor’ the buyer should be aware at the time of
buying the goods, because aseller never points out the defects of the goods being sold by him.
Ordinarily, a buyer buys goods on his own risk thatis, if the goods turn out to be defective
or of low quality or it is not fit for the specific purpose, then the sellercannot be held
responsible. If the seller sells the good by fraud, then the buyer can reject the goods. Thus,
accordingto this doctrine it is the duty of the buyer that before buying the goods he should
enquire into the goods thatwhether the goods are fit for his purpose or not.According to Secti
on 16, the explanation of this doctrine is that‘According to this Act
and according to the explanation of any other act prevalent at a particular time there is no
implied condition or warranty regarding the fitness of the goods for a specific purpose under
a contract of sale ofgoods. Therefore it is clear that the buyer should fully satisfy himseif.
If seller does fraud or intentionally concealsthe defects of the goods or the nature of the
defect is such that it cannot be detected with ordinary enquiry, thenthe seller will be held
responsible.If this doctrine is strictly followed, then the buyers will have to face difficulties,bec
ause every buyer is not as clever as to enquire into the quality or fitness of the goods.
There are certain exceptions to protect such buyers.
1. When the buyer clearly states the purpose of purchasing the goods to the seller and he
depends on the knowledgeand expertise of the seller, then it is an implied condition that the
sold goods shall be fit for the purpose. Thus whenthe buyer makes, the purpose of purchasing
the goods, known to the seller, this doctrine does not apply.
2. When the goods are sold by description, then it is implied condition that the goods
shall be merchantable and the goods shall be according to description. If the buyer has
examined the goods, theseller will be liable for latent defects.
3. When the goods are purchased under a trade or patent name, there is no implied
condition regardingthe fitness of the goods for a specific purpose.
4. If the seller sells goods by fraud or intentionally conceals the defects or there are latent
defect in the goods, eventhen this doctrine will not apply.
A condition is a stipulation essential to the main purpose of the contract and forms the
very basis of thecontract. Its breach gives rise to a right to treat the contract as repudiated.
Thus, if the condition is notfulfilled the buyer has a right to repudiate the contract, and refuse
the goods. If he has already paid theprice, he can recover it from the seller.
A warranty is a stipulation collateral to the main purpose of the contract, that is to say,
it is a subsidiarypromise. Its breach does not entitle the aggrieved party to repudiate the
contract. He can only claimdamages. Where there is a breach of warranty on the part of the
seller, the buyer must accept the goodsand claim damages.Where A purchases 100 bags of whe
at from B. Wheat must be fit for human consumption.
This is anessential stipulation. Hence it is called as condition. Other stipulations like packing,
etc., is a minor one, hence calledas warranty.Conditions and warranties may be express or imp
lied. An express condition or warranty
is one stateddefinitely in so many words as the basis of the contract. Implied conditions or
warranties are those which attach tothe contract by operation of law. The law incorporated
them into the contract unless the parties agree to thecontrary.A sold to B timber to be properl
y seasoned before shipment. It was agreed between the
parties, that in caseof dispute the buyer would not reject the goods but accept or pay for them
against documents. It was held that the provision as to seasoning was not a condition
but only a warranty. If the timber was not properly seasoned B had toaccept it and claim
damages for the breach of warranty.
The points of distinction between a condition and warranty can be summed up as
under :-
(1) A condition is a stipulation essential to the main purpose of a contract while a
warranty is astipulation collateral to the main purpose of contract.
(2) Breach of condition gives the right to treat the contract as repudiated while the
breach of warrantygives the right to claim for damages alone. The contract cannot be
repudiated because the breach of warranty does not defeat the purpose of contract.
(3) A breach of condition may be treated as breach of warranty but a breach of warranty
cannot be treatedas breach of condition.Let us take an example to make these two terms clear.
So where a man buys a particular
horse which is warranted quiet to ride. The horse, turns out to be a vicious one. Buyers
remedy is to claimdamages unless he has expressly reserved the right to return the horse.
Suppose instead of buying a particular horse, he specifically asks for a quiet horse-that
stipulations is a condition. Now the buyer can either return thehorse or retain the horse and
claim damages. (Hartley v. Hymans)
When condition to be treated as Warranty
Section 13 of the Sales of Goods Act mentions 3 cases in which a condition sinks or
descends to the level of awarranty. A condition descends to the level of a warranty in the
following cases :
(1) Where the buyer waives the condition;
(2) Where the buyer treats the breach of condition as breach of warranty;
(3) Where the contract is indivisible and the buyer has accepted the goods or part of the goods.
In all the above three cases the breach of a condition is deemed to be a breach of a
warranty and buyer can onlyclaim damages or compensation for the breach of the condition.
He cannot repudiate the contract or refuse to takedelivery of the goods.In the first two cases,
a condition is treated a warranty. at the will of the buyer; but in
thethird case the breach of condition can be treated only as breach of warranty; for once the
buyer has accepted the goods he cannot reject them on any ground. If on subsequent inspection
a breach of condition is disclosed, he can treat that asbreach of warranty and sue for damages.
Example: Suppose A promises to deliver 100 bales of cotton to B on 1st August, 80. A
delivers the bales ofcotton on 10th of August. Now in this contract, time is the essence of
contract. B can refuse to accept thedelivery. But he can also waive this right. He may treat
this breach of condition as breach of warranty byaccepting the goods and claim damages
instead.
IMPLIED CONDITIONS AND WARRANTIES

Even where, in a contract of sale, no definite representations are made, the law implies
certain representations ashaving been made. Such implied representations may amount to
conditions or warranties. Section 14 to 17 of the saleof Goods Act give a list of conditions
and warranties which are implied unless the circumstances of the contract aresuch as to show
a different intention.
Implied Warranties
Subject to a contract to the contrary the following warranties are implied in every contract
of sale.
1. That the buyer shall have and enjoy quiet possession of the goods. If his possession
is disturbed either bythe seller or some other person claiming superior title, buyer can recover
damages from the seller for the breach of animplied warranty of quiet possession. A bought
a typewriter from B for Rs.200. A spent Rs.11 O on overhauling it.Unknown to A and B the
typewriter was stolen property and A had to return it to the real owner. A was held entitled
to claim from B the sum of Rs.200+110=310 as damages for breach of warranty of quiet
possession.
2. That the goods are free from any charge or encumbrance in favour of a third party not dec
lared orknown to the buyer before or at the time when the contract is made. It the
buyer has to discharge theamount of the charge or encumbrance on the goods, there is a
breach of implied warranty and he canclaim the amount as damages from the seller.
A sells to B a used motor-car which was previously mortgaged to C, but B has no
knowledge of the mortgage and Adoes not inform B of its existence. A is liable to B for
breach of the implied warranty against encumbrances.
 Implied Conditions
1. Conditions as to titleThere is an implied condition on the part of the seller that, in the case
of sale, he has the
right to sell the goods, and in the case of an agreement to sell, he will have the right to sell
the goods when theproperty is to pass. Thus if the seller has no title to the good, the buyer
can reject the goods, or if he has takenpossession of the goods and is deprived of it by the
real owner, the buyer can recover the full price of the goods evenif he has made use of them.A
bought a motor-car from and used it for 4 months. B had no title to the car because
hehas obtained the possession by theft and consequently
A had to surrender it to the real owner. A was entitled torecover from B the full price even tho
ugh he used the car for 4 months. (Rowland Vs.Divall).

2. Sale by DescriptionWhere there is a sale of goods by description, there is an implied conditi

on that the goods
shall correspond with the description. Goods are sold by description when they are described
by the contract by meansof words, symbols, number of grade, and the buyer relies on them
when buying. The rule that the goods shallcorrespond with the description applies both to
specific and unascertained goods.A bought a truck load of corn fromB on the basis of a lett
er from the seller which
referred to the corn as “No.3 Yellow 21 per cent moisture”. When thecorn was received,
it was 49 per cent moisture, mouldy and unfit for use. A could reject the goods or accept
them andsue for damages.
1. Condition as to quality or fitness: This condition in respect of merchantability and
wholesomeness discussedbelow are exceptions to the doctrine of caveat emptor.Ordinarily, in
a contract of sale of goods, there is noimplied warranty or condition that
the goods supplied are of particular quality or are fit for a particular purpose.But in the
following cases, there is such an implied condition.
(a) Where the buyer makes known to the seller the purpose for which he is buying the
goods and indicates thathe is relying upon the skill and judgement of the seller, and the goods
are of a description which it is in the course ofseller’s business to supply, there is an implied
condition that the goods shall be reasonably fit for that purpose.A askedB to supply him a cert
ain number of clay pots which are suitable for heating and
retaining molten glass, the buyer reliedupon the judgement and skill of the seller. If the
clay pots are not suitable for the purpose there is a breach ofimplied condition as to
fitness for a particular purpose.If the buyer purchases an article under its patent or their traden
ame, there is no implied condition as to its fitness for any particular purpose.
(b) Condition as to merchantable quality: But if the seller sells an article of the description
in which he usually deals,even under its patent and trade name, there is an implied condition
that it is of merchantable quality, i.e., it issaleable. Thus in the sale of a refrigerator, the name
of the article itself implies that the seller warrants the machineto be fit for a particular
purpose.Although there is an implied condition as to merchantability, yet if the buyerhas examine
d the goods, there is no implied condition as regards defects which such examination ought to
have revealed.

Example
(i) A sold to B by sample some apples put up in cans. The sample can appeared to be
satisfactory , butthe remainder of the goods were found to be spoiled. A was liable
to pay damage to B for a breach ofimplied condition. B could reject the goods, if he liked.
(ii) A sold two parcels of wheat by sample to B. B went to inspect the goods. One parcel
was shown, notboth. On finding the other parcel defective B was entitled to rescind
the contract.
(iii) Some “worsted coating” quality equal to sample was sold to tailors. The cloth was
found to have adefect in the texture which could not be detected on reasonable
examination, and consequently the clothwas unfit for stitching into coats. The seller
was held liable to pay damages to the buyers even though thesame defect existed
in the sample, but was not detected on examination.
4. Sale by Sample as well as by Description
Where goods are sold by sample as well as description, the goods must correspond both
with the sample and with thedescription. In such cases, if the seller has seen and approved
the sample and the goods are according to the sample,he can repudiate the contract if these
are not according to description.A agreed to sell B some oil described as“foreign refined rape
oil, warranted only equal
to sample”. The oil tendered was the same as the sample, but it wasnot “foreign refined
rape oil” being a mixture of it and hemp oil. The buyer could reject the oil.

5. Condition as to quality or fitness. In a contract of sale there is no implied condition as

to quality orfitness of goods for a particular purpose. The buyer must examine the goods
thoroughly before he buysthem in order to satisfy himself that the goods will be suitable of
the purpose for which he is buying them.The points to be noted are :
(1) Where the buyer, expressly or by implication, makes known to seller the particular
purpose for whichhe needs the goods and depends upon the skill and judgement of
the seller whose business is to supplygoods of that description, there is an implied
condition that the goods are reasonably fit for that purpose.
(2) An implied condition as to quality or fitness for a particular purpose may also be
annexed by theusages of trade.
(3) In case the goods can be used for a number of purposes, the buyer must tell the seller
the particularpurpose for which he requires the goods. If he does not, he cannot hold
the seller liable if goods do not suitthe particular purpose for which he buys the goods.
6. Condition as to merchantability. Where goods are bought by description from a seller
who deals ingoods of that description, there is an implied condition that the goods are of
merchantable quality.If goodsare of such a quality and in such a condition that a reasonable p
erson acting reasonably would accept them afterhaving examined them thoroughly, they are of me
rchantable quality.But where the buyer has examined the goods,there is no implied condition a
s regards defects which such examination ought to have revealed.
7. Condition as to wholesomeness. In the case of eatables and provisions, in addition to
the impliedcondition as to merchantability, there is another implied condition that the goods
shall be wholesome.
Example :
A sold to B a tin of disinfectant powder, knowing that it was likely to be dangerous to
B if it was openedwithout special care being taken. B opened the tin whereupon the
powder flew into her eyes, causing injury. Awas held liable to pay damages to B, as he
should have warned B of the probable danger.
An Unpaid Seller

The definition of ‘unpaid seller’ is provided in section 45 of the Sale of Goods Act and it runs as
follows “the seller of the goods deemed to be an unpaid seller is:

 when the whole of the price has not been paid

 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.”

Thus, a seller who has received only a part of the payment is an unpaid seller. However, a seller
is not an unpaid seller if the buyer has tendered, i.e. offered to pay the price, and the seller has
refused to accept the payment. In such a case, the seller will lose the rights of an unpaid seller.

Illustration: Seema sold certain goods to Bindu for Rs.10,000. Bindu made the payment
by cheque. Seema presented the cheque to the banker for payment but it got
dishonoured as there was not enough money in the bank account of Bindu. Seema can
return the cheque to Bindu and claim the payment as Seema is in the position of an
‘unpaid seller’.

The seller must not refuse to accept the payment when tendered. If the price has been offered by
the buyer but the seller wrongfully refuse to accept it, the seller is not considered as an‘unpaid
seller’.

Illustration: Suresh sold certain quantity of jute to Jatin for Rs.5000. Jatin paid
Rs.2500 and failed to pay the balance. In this case, Suresh is in position of an ‘unpaid
seller’. The cost of the jute is Rs. 5,000, and until Jatin makes the entire payment,
Suresh can claim the payment due to him
Where the price has been paid to the seller by bill of exchange, cheque or promissory note, etc.,
the seller is not an unpaid seller’. However if such bill of exchange, cheque, etc. is dishonoured,
the seller becomes an ‘unpaid seller’.

The Rights of An 'unpaid Seller'

The rights of an‘unpaid seller’ can be studied under two main heads:

a) Rights against the goods and b) Rights against the buyer.

Rights of an ‘unpaid seller’ against the goods:

In some cases after the sale of goods the seller continues to have possession of the sold goods. At
such times, an unpaid seller has certain rights against the goods. These can be further studied
under two heads;

a) Where the property of goods has passed to the buyer; and

b) Where the property of goods has not passed to the buyer.

 Where the property of goods has passed to the buyer

When the property in goods has passed to the buyer, there are three rights of an unpaid seller.
These are:

 Right of Lien,
 Right of stoppage in transit
 Right of Re-sale
These are discussed in detail below:

 Right of Lien

The Right of Lien means, the right to keep the possession of the goods until the charges or the
price has been paid. This right is available to the unpaid seller where the goods have been
transferred to the buyer. This is because lien depends on possession. Even if the seller has
handed over the documents of title to the buyer, the lien is not affected. “According to Section
47, the unpaid seller can exercise lien, only when the following conditions are satisfied:

 where the goods have been sold without stipulation as to credit; or

 where the goods have been sold on credit but the term of credit has expired; or
 when the buyer has become insolvent.”

This Section implies that the unpaid seller can exercise his lien over the goods, even if he is in
possession of such goods only as an agent for the buyer. It is to be noted that the right of lien will
be only for the price of the goods and not for any other charges.

“If in such case where the unpaid seller has made only a part of the delivery of the goods he has
the right of lien on the rest of the goods, unless such a part delivery has been made under an
agreement to waive the lien” [Section 48].

If under the contract the delivery of goods is to be made in installments the seller cannot stop the
delivery of the rest of the installments in case the buyer defaults in making the payment for one
installment. However, the seller can stop the delivery when the buyer becomes insolvent or the
default by the buyer actually implies a cancellation of entire contract.

Termination of Lien: The unpaid seller loses the right of lien as soon he fails to have the
possession of goods. Under Section 49 of the Sale of Goods Act the unpaid seller of goods can
lose his lien when he delivers it to a carrier or delivers to the buyer or by a waiver or when the
buyer makes the payment. These are explained below:

 Delivery to Carrier: When the unpaid seller delivers the goods to carrier so that they may
be taken to the buyer, the right of lien is lost. However, this should be done without the
 seller reserving the right of disposal. If the seller reserves the right of disposal then the
seller will consider the carrier as his agent and the latter will have to act under the
supervision of the seller.

Case Law 1:

Valpy vs. Gibson [1]:

The goods sold were delivered to the buyer’s shipping agents, who had put them on
board a ship. However, the goods were returned to the sellers for repacking. While they
were still with the sellers for this purpose, the buyer became insolvent and the sellers
claimed to retain the goods in the exercise of right of lien because they were unpaid.
However it was held that he could not do so as he lost their lien by delivery of goods to
the shipping agent.

Case Law 2:

Jain Mills & Elec. Store v. State of Orissa, [2]:

A sold 100 bags of cement to B and delivered them to the Railways for the purpose of
transmission to the buyer B. A obtained the railway receipt in B’s name and sent the
same to B to enable him to obtain the delivery of the goods from the Railways. While the
bags of cement were in transit, the buyer (B) became insolvent, and the seller (A) was
still unpaid. In this case, the seller’s right of lien is lost as the goods are delivered to the
carrier (Railways). However, he still has the right of stoppage in transit
 Delivery to the Buyer: The unpaid seller loses the right of lien when the buyer or buyer’s
agent obtains the possession of the goods in a legal manner. However, the lien continues
in case the buyer takes possession of the goods without the permission of the seller.
 By Waiver of Lien: There can be an express or implied waiver of lien. When in a contract
of sale it is specifically written that the seller does not have the right to retain possession
until the payment of price, it is an express waiver. An implied waiver is when goods are
sold on credit or if there is a sub-sale or if the seller uses the goods for himself or refuses
to deliver them.
 Payment by the buyer: The seller will not be an unpaid seller when the buyer makes the
payment for the goods. Here the seller cannot term himself as an unpaid seller by
refusing to accept the payment for the goods by the buyer.
 TRANSFER OF PROPERTY IN CONTRACTS OF SALE OF GOODS

 The most important consequence of a contract of sale of goods is the transfer of property
in the goods from the seller to the buyer because risk always follows such a transfer of
ownership and the time of payment as well as the time of delivery of the goods is not an
essential consequence of such a contract.

 The most important point regarding the transfer of ownership is that it can take place only
in case of ascertained and specific goods. According to Sec. 18 “No transfer of property
in the goods can take place from the seller to the buyer unless and until they are
ascertained”.

 Illustration: A sells 200 maunds of wheat out of a total of 618 maunds stored in a
warehouse and gives a delivery order to B, the purchaser, directing the warehouse men to
deliver 200 maunds of wheat to B. B lodges the delivery order with the warehouse men to
no transfer of property takes place from A to B so far as the quantity to be sold to him is
concerned because the goods were unascertained.

 For the consideration of the problem of transfer of property it can be divided in two broad
categories:

 (a) Transfer of Property in Specific and Ascertained Goods

 According to Sec. 19 where there is a contract of sale of specific or ascertained goods, the
property in them shall pass from the seller to the buyer when the parties have intended it
to pass.

 In order to find out the intention of parties in this regard, consideration is to be given to
the terms of the contract, conduct of the parties and circumstances of the case.

 But if the parties fail to lay down their intentions regarding the transfer of property in the
goods, certain rules have been laid down for ascertaining the intention of the parties as to
the time at which the property in the goods is to pass to the buyer, which are contained
from Sec. 20 to 24 and which are the following:

 1. When goods are in a deliverable state: According to Section 20 where there is an

unconditional contract for the sale of specific goods in a deliverable state the property in
the good passes to the buyer when the contract of sale 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.

 Illustration : Where there is a contract between A & B for the purchase of a specific
quantity of hemp stored on the premises of the seller A; price to be paid on 4th February
and the delivery to be given on 1st of May while the contract is being made on 20th
January the property in the specific lot of hemp shall be transferred from A to B on 20th
January itself.

 As goods under this rule are in such a state they can be immediately delivered to the
buyer, there remains nothing which can prevent a transfer of ownership. But if the parties
in such cases themselves decide that no transfer of property shall take place till the entire
price is paid, or till the delivery of goods has been given to the buyer, there would be no
transfer of property in the goods inspite of the fact that the goods are specific and in a
deliverable state. As for example goods sold under hire purchase agreement.

 2. When goods are not in a deliverable state: According to Section 21 where there is a
contract for the sale of specific goods but the seller is bound to do something to the goods
in order to put them in a deliverable state, property in them shall not be transferred until
such thing is done by the seller and buyer has notice thereof.
 Illustration: There was a contract for the wood of Oak trees in a certain forest. The
buyer purchased the wood from the seller selecting certain portion of trees and rejecting
others. According to the custom of trade the seller was to separate the selected portions
from the rejected portions. But the buyer threw upon himself the duty of separating the
two portions. The court decided that no transfer of ownership has taken places so far as
wood is concerned.

 3. When goods are to be measured etc.: According to Section 22, where there is a
contract for the sale of specific goods in a deliverable state but the seller is bound to
measure, weight or count the goods in order to determine the price, there would be no
change of ownership from the seller to the buyer till such act is done and the buyer has
notice thereof.

 Illustration: There was a contract for the sale of 289 bales of goat skin. Every bale was
to contain

 5 dozens smaller bales and according to the contract the price was to be determined
according to the price of smaller bales so that the seller was to count the number of
smaller bales in every bigger bale. It was decided that no transfer of property has taken
place when the bales were destroyed by the fire during the process of counting by the
seller.

 Transfer of property in unascertained goods: According to section 18 no transfer of

property can take place from the seller to the buyer in unascertained goods. Therefore
some acts have got to be done in order to convert unascertained goods into ascertained or
specific goods. Such acts are collectively and technically called ‘appropriation’.
According to Section 23 “Where there is a contract for the sale of unascertained or future
goods by description and goods of that description as well as in deliverable state are
unconditionally appropriated to the contract, either by the seller with the consent of the
buyer or by the buyer with the consent of the seller, the property in the goods shall be
transferred from the seller to the buyer, as soon as such appropriation is made, the
consent of the buyer or the seller as the case may be obtained either before or after
appropriation.
 Thus appropriation of goods is the most important act which permits the transfer of
property from the seller to the buyer. Appropriation may be defined as the application of
the goods for the purposes of a contract of sale such an act must have the following
essentials.

 1. Goods which are appropriated must be of the same description under which they are
sold: For example where an order was placed for tea sets, jars and glasses made of china
clay and where the seller while supplying the goods also placed some other things in the
parcel it was held that there was no appropriation because the goods did not exactly
answer the description given in the contract.

 2. The goods appropriated to the contract must be in a deliverable state because unless
they are in such a state no transfer of property can take place.

 3. The goods must be unconditionally appropriated to the contract: According to section

23 sub-section 2. “Goods are said to be unconditionally appropriated to the contract when
the seller gives them to the buyer or a carrier or some other bailee (whether named by the
buyer or not) for the purpose of transmission to the buyer. The most common form of
appropriation is the delivery of goods to person for the purpose of transporting them to
the buyer and as soon as this is done, generally speaking, the property shall be transferred
to the buyer if the seller has not reserved the right of disposal as defined by section 25.

 4. Basis of appropriation: Appropriation of goods is done on the basis of consent of

either the buyer or the seller. Such a consent may be obtained either before or after
appropriation.

 By the buyer with the consent of the seller: Where the buyer is holding the goods on
behalf of the seller as an agent, the buyer can appropriate the goods for the purpose of the
contract, inform the seller regarding the same, obtain his consent only them the property
shall be transferred to the buyer.

 By the seller with the consent of the buyer

 Illustration No.1 A agrees to purchase 10 tons of petrol from B and already sends the
steel tins to B for packing the petrol. As soon as B will fill the petrol in the steel tins sent
 to him by the buyer, the property shall be transferred from B to A because the consent of
the buyer to the appropriation made by the seller shall be taken to have been given by the
buyer himself supplying the steel tins (consent of buyer before appropriation).

 Illustration No. 2 A of Madras orders certain goods from B a manufacturer of Calcutta.

After the goods are ready, B appropriates the goods to the contract informing A that the
goods are ready for delivery upon which A requests B to send them by Rail to Madras
after affecting the Insurance thereon. The property in the goods shall pass from B to A as
soon as the goods after being insured, are handed over to the Railway Authorities
(consent of the buyer after appropriation).

 Illustration No. 3 A sells 500 maunds of rice out of bigger quantity to B and the rice is
packed in seller’s gunny bags and the words “wait orders of the buyer” are pasted on the
gunny bags with the address of the buyer, it was decided that the property has not
changed hands although the goods are in a deliverable state because the buyer’s consent
to the appropriation has not yet been obtained.

 5. Method of Appropriation: Appropriation of goods for the purpose of the contract may
be made:

 (a) By packing the goods in suitable containers.

 (b) By separating the goods from a larger quantity.

 (c) By the delivery of the goods to a common carrier or bailee for the purpose of
transmission to the buyer without reserving the right of disposal which has been defined
by Section 25 of the Sale of Goods Act as follows:

 1. Where there is a contract for the sale of specific goods or unascertained goods which
are unconditionally appropriated to the contract, the seller may under the terms of the
contract or appropriation lay down certain conditions to be fulfilled by the buyer. In such
a case although goods may be delivered to the common carrier or other bailee for the
purpose of transmission to the buyer the property shall not be transferred to the buyer.

 Illustration: A sells 500 bales of cotton to B on the condition that certain bills of
exchange which have been drawn by B on A and which are still in circulation should be
withdrawn by the buyer. The delivery of the bales was to be given in installments. The
 buyer fails to withdraw the bills of exchange and the seller stopped the delivery of
installments claiming the price of the bales already delivered, it was decided that no
transfer property has taken place even in the bales which have been delivered because the
buyer has not fulfilled a condition laid down in the contract.

 2. Where the seller sends the goods and takes a bill of lading or railway receipt,
deliverable to himself or his order it is presumed that the seller has reserved the right of
disposal over the goods.

 3. Where the seller sends the goods and draws upon the buyer for the price, sending to
him the bill of lading of the railway receipt along with a bill of exchange to be either
accepted or paid by the buyer, the buyer shall not acquire the ownership of the goods till
he has accepted or paid the bill of exchange and if by mistake he acquires the bill of
lading without accepting or paying the bill of exchange, the property does not pass to
him.

 Illustration: A sells goods to B. He weights the goods at his own place of business,
sends them to B’s placed, taking the railway receipt and sending the same to his bander at
B’s place of business instructing him to surrender the R/R to the buyer B only when he
pays the Bill of exchange. The banker surrenders the receipt to the buyer B upon his
acceptance of the bill. Later on B refuses to honour the goods. A files a suit for the
recovery of the price. Held that A has no right to recover the price because the property in
the goods has not passed to B, it being contingent upon the payment and not the
acceptance of the bill.

 Consequence of the transfer of property: The most important consequence of the

transfer of property under a contract of sale goods is the risk passes with the property.
According to section 26, where the property in the goods remains with the seller, the
seller bears the risk and when the property passes to the buyer, the risk devolves on the
buyer whether the delivery has been made or not. But if there is any deal in the transfer of
property due to the fault of any one of the parties to the contract, the risk shall remain
with the party but for whose fault the property would have been transferred.

 In other words there can be conditions under which there may be divorce between risk
and ownership.
 Illustration 1 : There was a contract between A & B for the sale of 814 tons of kerosene
oil B, the purchaser, paid Rs. 1000 as part payment of the price. The seller A was himself
to receive the consignment from A third party. On the receipt of the Railway receipt, A
endorsed the same to the buyer B. The consignment was destroyed in transit, held that B
is liable for the loss and cannot get back the refund of part payment made by him because
as the R/R was endorsed in his name, he became the owner of the good and therefore
shall have to bear the risk of loss.

 But where the goods have been dispatched by the seller “on the risk and on account of the
buyer” but the railway receipt was taken in the name of the seller or it was taken in the
name of the buyer but was sent to the seller’s agent with the instructions to part with the
same upon the fulfillment of certain conditions by the buyer, the risk shall remain with
the seller because he has reserved the right of disposal.

 Transfer of property in transaction of sale or return: According to section 24 where

the goods are sent to the buyer “on approval or on sale or return” or similar other terms
the property in them shall pass to the buyer:

 (a) When the buyer expresses his approval or acceptance to the buyer or does any other
act adopting the transaction:

 Illustration : A gives a diamond to B on sale or return. B gives the same to C on similar

terms and C delivers the same to D on sale or return. The diamond was lost from the
custody of D. As B cannot return the diamond to A, his act in giving the diamond to C
shall tantamount to adopting the transaction. Similarly if the buyer on sale or return
pledges the goods to a third party the act of pledge shall be taken to be an act adopting
the transaction.

 (b) Where the goods were sent to the buyer on sale or return with a fixed period of time
within which he is to express his approval, the property shall pass to the buyer as soon as
that period of time expires although the buyer does not give his approval or acceptance
and if no such time is fixed upon the expiry of reasonable time.

 Transfer of title: In the performance of a contract of sale of goods by a seller there are
three stages, namely, the transfer of property in the goods, the transfer of possession of
 the goods, i.e. delivery of the goods and the passing of the risk. The main object of a
contract of sale of goods is the transfer of property in goods from the seller to the buyer.
The term ‘property in goods’ is different from the term ‘possession of goods’: ‘property
in goods’ means the ownership of the goods whereas ‘possession of goods’ means
custody or control of goods.

 According to Sec. 27 only that person has a right to sell goods who is a real owner of
them so that a sale by non-owner may create certain legal complications to avoid which
Sec. 27 had laid down the following exceptions:

Until July 1930, the law of sale of goods in India was governed by chapter VII of the Indian
Contract Act, 1872 (sections 76 to 123). It was eventually found that the Law contained within
the Indian Contract Act was not adequate to meet the needs of the community and that, in the
light of the new developments made in mercantile laws, some of the provisions of this branch of
law required alterations. Consequently, the Sale of Goods act was passed in 1930, based upon the
English statute of Sale of Goods, 1893.

This paper focuses on Chapter VI of the Sale of Goods Act, which relates to suits for the Breach
of a Contract. It shall be divided roughly, 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 and seller – Sections 60 and 61

The paper is structured in a section by section format, wherein the sections, as divided under the
various heads are described and explained individually.

Seller’s remedies against buyer

The suits that may be instituted by the seller against the buyer under the Act can be roughly
divided into two types

i. Suit for Price

 ii. Damages for non-acceptance

i. Suit for Price

Section 55 (1) Where 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.

(2) Where 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 the price although the property in the goods has not passed and the goods have not been
appropriated to the contract.

From the above section, it can be seen that except as provided by sub-section (2), the seller can
only sue for the payment when the property has passed to the buyer. The passing of the property
depends upon certain conditions, and if these conditions are not fulfilled, he cannot sue for the
payment under this section.

Where goods are sold for a particular amount and the payment has to be made partly in cash and
partly in kind, the default if made in kind entitles the seller to sue for the remainder of the
price[i].

In the case of Colley V. Overseas Exporters[ii] there was a contract for the sale of some
unascertained leather goods to the buyer f.o.b Liverpool .In this case, though the seller sent the
goods, yet they could not be put on board as no definite ship had been named by the buyer.
When an action was brought by the buyer against the seller, it was held that the seller was not
entitled to pay the price as the goods had not yet moved into the possession of the buyer. In the
absence of an agreement relating to the payment of price on a certain day, irrespective of the
delivery, the seller is not entitled to sue the buyer for payment, but can bring about an action for
damage.

Where there is a contract for sale wherein the price is payable on a certain date, irrespective of
delivery and the buyer wrongfully neglects or refuses to pay such price the seller may sue for the
price even though the property has not been passed and the goods have not been appropriated to
the contract. This can be seen in Dunlop v Grote[iii],according to the facts of the case, there was
a contract for the delivery of Iron between 3rdMarch and 30th April as per the requirements of the
buyer. The price was to be paid on the 30th of April. However, only a part of the consignment
was received by the buyer on April 30th as he did not require anymore. In the action brought by
the seller, it was held that the seller could recover the whole price and was not required to show
that the goods were appropriated to the contract.

ii. Damages for non-acceptance

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.

The damages are assessed on the basis of the principles contained in sections 73 and 74 of the
Indian Contract Act, 1872. According to section 73 of the Indian Contract Act, when a contract
has been broken, the party who suffers by the breach is entitled to receive, from the party who
has broken the contract, compensation for any loss caused to him thereby, which naturally arose,
in the usual course of things from such a breach, or which the parties knew when they entered
into the contract, to be likely to result from the breach of it.

Furthermore, in estimating the loss or damage caused by a breach of contract, the means which
existed of remedying the inconvenience caused by the non-performance of the contract must be
taken into account.

The date at which the market price is to be ascertained is the day on which the contract ought to
have been performed by delivery and acceptance as fixed by the contract or, where no time is
fixed, at the time of the refusal to perform.

By virtue of the provisions of sections 55 and 63 of the Indian Contract Act, where the time for
the performance is fixed by the contract but it is extended and another date substituted for it by
agreement between the parties, the substituted date must be taken as the date for ascertaining the
measure of damages.

In the case of Suresh Kumar Rajendra Kumar v K Assan Koya & sons[iv], the plaintiff sold,
through the commission agents, the goods and claimed compensation from the buyer who had
rejected them. While doing so the plaintiff had taken all the measures necessary to sell the goods
urgently in the ordinary course of business. In the absence of any records to show that the sale
was conducted in an improper manner, it was held by the court that the plaintiff was entitled to
claim the difference between the price at which the rice was supposed to be sold to the
defendants, and the price at which it was finally sold.

Where the goods are deliverable by instalments and the buyer has to accept one or the other or all
the instalments, the difference in prices is to be reckoned with on the day that a particular
instalment was to be delivered[v]. Where the military authorities refused to accept further
supplies of cots in breach of their contract, the J&K High court allowed Rs. 4 per cot as the
damages to the supplies as the profit which the supplier would have earned under his contract of
supply[vi].

It has been seen that the seller has various remedies against both the goods and the buyer
personally, and in many cases where those remedies exist he still has the option of availing
himself of the remedy declared by this section[vii]; but where the property has not passed and
there is nothing in the contract which enables him to resell the goods and charge the buyer with
the difference between the contract price, and the price realized on the resale, or to sue for the
price irrespective of delivery, or the passing of the property, the remedy provided by this section
is the only remedy by which he can recover pecuniary compensation for the buyer’s breach of
contract.
Buyers remedies against seller

The suits that may be instituted by the buyer against the seller can be roughly divided into three
types

i. Damages for non-delivery

ii. Remedy for breach of warranty

iii. Specific Performance

i. Damages for Non- Delivery

Section 57 – Where the seller wrongfully neglects or refuses to deliver the goods to the
buyer, the buyer may sue the seller for damages for non-delivery.

When the property in the goods has passed, the buyer, provided that he is entitled to the
immediate possession, has all the remedies of an owner against those that deal with the goods in
a manner inconsistent with his rights. If, therefore, the seller wrongfully re-sells them, he may
sue the seller in trover, and also against the second buyer, though as against him the rights may
be cut down by the provisions in sections 30 and 54.

In the case of non-delivery, the true measure of damages will be the difference between the
contract price and the market price at the time of the breach. The market value of the goods
means “the value in the market, independently of any circumstances peculiar to the plaintiff (the
buyer)”[viii].

Where he, the seller, is guilty of breach of an agreement to sell, the following remedies may be
available to the buyer:

(i) The buyer may sue for damages for non-delivery under section 57 of the Sale of Goods Act

(ii) In case the price has been paid by the buyer, he may recover it in a suit for money had and
received for a consideration which has totally failed[ix].

Where however the buyer has failed to prove the alleged damages caused due to short supply of
goods by seller and has also not served to seller a notice under Section 55 of the Indian Contracts
Act, the buyer cannot claim damages.[x]

In the case of pre-payment, the date for ascertaining the measure of damages must be the date of
the breach, though it might be said in such a case, the buyer has not got the money in his hands
and cannot therefore go into the market and buy; and in conformity with this idea it has been
ruled at nisi prius that the date of the trial may be taken. However a more rational view is that
even in this case the date of breach should be taken to calculate the difference between the
contract price and the sale price, and the buyer can recover this amount, along with an
interest[xi].

In a case where the seller failed to deliver Finnish timber, and the nearest substitute which the
buyer could obtain was English timber which involved more expenditure, in cutting and also
more wastage, it was held that the buyer was entitled to claim the extra cost since the buyer had
acted reasonably in mitigating his claim[xii].

Where the seller failed to deliver timber, the market price of the timber, on the due date for
delivery was taken as the basis for assessing damages. The Privy Council observed that “had the
seller supplied the timber, the buyers would have made their profits and would have still had the
other timber to sell upon which they were entitled to make such profits as they could.”[xiii] In
order that the buyer may recover as damages an amount in excess of that which represents the
difference between the market price and the contract price, it is necessary to prove facts which
will bring the case within the second branch of S. 73 of the Contract Act.
ii. Remedy for Breach of Warranty

Section 59 – (1) Where 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 of such breach of warranty entitled to reject the goods;
but he may-
 (a) Set up against the seller the Brach of warranty in diminution or extinction of the
price; or

(b) 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.

A breach of warranty does not entitle the buyer to reject the goods and his only remedy would be
those provided in s. 59 namely, to set up against the seller the breach of warranty in diminution
or extinction of the price or to sue the seller for damages for breach of warranty. From the
definition of warranty given in s. 12(3) it is clear that a breach of it gives rise to a claim for
damages only on the part of the buyer. It is also laid down by s. 13 that, even in the case of a
breach of condition, if the buyer has accepted the goods, or, in the case of entire contracts, part of
them, either voluntarily, or by acting in such a way as to preclude himself from exercising his
right to reject them, he must fall back upon his claim for damages as if the breach of the
condition was a breach of warranty[xiv]. This section declares the methods by which a buyer
who has a claim for damages in either case may avail himself of it. It does not deal with the cases
of fraudulent misrepresentation, which may enable the buyer to set aside the contract nor with
cases where, by the express terms of the contract the buyer may return the goods in case of a
breach of warranty. Also, in cases where the buyer has lawfully rejected he goods, he must
proceed not under this section, but under s. 57, and if necessary under s. 61, to recover the
purchase price and interest.

It must be noted here that in such cases, damages are assessed in accordance with the provisions
contained in section 73 of Indian Contract Act, 1872. This was also observed by a division bench
of the Bombay High Court in City And Industrial Development Corporation of Maharashtra ltd.,
Bombay v Nagpur steel and alloys, Nagpur[xv]; “Remedies under Section 59 are not absolute
and cannot be resorted to at any point or strategical point suitable to the buyer. He is duty bound
to give notice of his intention. Its proper time, form and manner will, of course, depend upon the
facts and circumstances of each case. To hold otherwise, would amount to placing the seller in an
awkward and indefinite position — not warranted either by law or by equity.”

In the case of a warranty of quality, the presumption is that the measure of damages is the
difference between what the goods are worth at the time of delivery, and what they would have
been worth according to the contract which this must be ascertained by reference to the market
price at the time[xvi].

In a majority of cases it is found that the warranty in question is not a warranty as defined in s
12(2), but a condition which falls under s 13(2) to be treated as a warranty. Very often it is the
condition that the goods should correspond with the description by which they were sold, or
should be fit for a particular purpose.

It is necessary that the buyer should rely on the warranty, and act reasonably, that is to say, he
should take reasonable steps to minimize the damages. Where there is a breach of the warranty
that the goods should be fit for a particular purpose, the rule again is that the damages should be
such, as may naturally flow from the breach. This was seen in a case where the plaintiff’s wife
died from the effects of eating tinned salmon which the plaintiff bought from the defendant, the
plaintiff was held entitled to recover, as damages for the breach of the warranty, that the salmon
would be fit for human consumption. Compensation was awarded for medical expenses, funeral
costs, and the loss of her life.[xvii]

There may also be breaches of other conditions which can be treated as breaches of warranty,
such as the warranty of title. In such a case also, the buyer may be involved in difficulties with
sub-buyers, for instance, he may buy a motor car from one who has no right to sell it and may
resell it to a third person, from whom the true owner may recover it, or its value.
iii. Specific Performance

Section 58- Subject to the provisions of the Specific Relief Act, 1877, in any suit for
breach of contract to deliver specific or ascertained goods, the court, may, if it deems fit, on the
application 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 the payment of damages. The
decree may be unconditional, or upon such terms and conditions as to damages, payment of the
price, or otherwise, as the Court may deem just, and the application of the plaintiff may be made
at any time before the decree.

This section may best be explained by an illustration; there was a contract to sell a ship to a
German ship owner. The ship was an old ship but her engines and boilers were new, so as to
satisfy the German regulations, and the buyer could have her registered immediately in
Germany. In view of these facts and the price, the ship was of peculiar value to the buyer, and
there was only one other ship on the market that would suit his requirements. The court granted
specific performance of the contract[xviii].

Originally, the provisions relating to sale of goods were part of the Indian Contract Act, 1872
which as such did not provide for the equitable remedy of specific performance. Subsequently, a
separate Act namely Specific Relief Act, 1877, was enacted to provide for equitable remedies
including the remedy of specific performance.

The section provides a remedy to the buyer, and gives no correlative right to the seller. It is
therefore only on application of the buyer when suing as plaintiff, that the contract of sale can be
enforced specifically and the section only applies when the contract is to deliver specific or
ascertained goods. It has been held that a seller is not entitled to enforce specific performance of
the contract under s. 58 because it deals with the case of a buyer of specific goods in respect of a
contract to deliver specific or ascertained goods. ‘Specific’ here has the meaning which is given
in section 2(14) while ‘ascertained’ means ‘identified in accordance with the agreement after a
contract of sale is made’.[xix]

Section 58, as noted above, reproduces with some suitable changes s. 52 of the English Act.
Before passing of the Sale of Goods Act, 1930, there existed Specific Relief Act 1877, Chapter II
of which dealt with specific performance of an existing contract. This is also why Section 58 of
the Sale of Goods Act, 1930 begins with the words “subject to the provisions of Chapter II of the
Specific Relief Act, 1877”.

The court has wide discretion to impose conditions. In one case, specific performance of
agreement to transfer shares was granted subject to a lien to protect the transferor against non-
payment of the price of the shares.[xx] In another case, the House of Lords while ordering the
specific performance of a contract to sell shares put a condition that the buyer should pay interest
on the purchase price which he had been entitled to retain pending the order.[xxi]
Remedies available to both seller and buyer

The suits that can be instituted by either the buyer or the seller are of two types

i. Suit for repudiation of contract before date or anticipatory breach

ii. Interest by way of damages and special damages

i. Suit for repudiation of contract before date or anticipatory breach

Section 60 – Where 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 use for damages for the breach.

This section, does not appear in the English act, and deals with anticipatory breach of a contract,
that is to say, a manifested intention, by either party, to not be bound by the promise to perform
that part of the contract when the time of performance arrives. Whether or not there has, in fact,
been repudiation depends on the facts of each particular case.

The measure of damages is not fixed by date of the defaulting party’s repudiation. It is decided,
in case of goods for which there is a market, in accordance with the difference between the
contract price of the goods and market price on that day. This is done in order to bring the
plaintiff as near to the position as he would have been in, had the contract not been repudiated. In
cases of contracts where no date is fixed, and a party refuses to perform the contract the principle
of reasonable time is applied. In this case the date of repudiation is treated as the date on which
the contract is broken, and damages are calculated on the basis of this date.

If the party not in default declines to accept the other party’s repudiation, he keeps the contract
alive for all purposes, as can be seen from Frost v Knight. Hence it follows that if, when the time
for performance arrives, he himself is unable to perform or does not perform his contract, the
position will be the same as it would have been if there had been no anticipatory repudiation by
the other party and the latter may be discharged, and can also sue for damages.

If therefore, the seller after refusing to accept the buyer’s anticipatory repudiation, when the time
for performance arrives, tenders goods which are not of the contract description, or tenders
documents under a CIF contract which the buyer is not bound to accept, the buyer may lawfully
reject the goods or the documents and the seller will be without remedy; or the buyer may accept
the goods tendered and treat the breach of condition as a breach of warranty and recover
damages accordingly.

In Hochster v De la Tour[xxii] it was held that where one of the parties repudiates the contract
before the time of the performance under the contract, the other party becomes entitled to sue for
damages for the breach before the date of performance of contract was due. In this case, the
defendant had employed the services of the plaintiff, to go with him on tour. The service of the
plaintiff was to begin from the 1st June, but on 11th May the defendant informed him that his
services were no longer required. The plaintiff filed the suit to recover damages for breach of
contract before the arrival of the time of performance of the contract.
ii. Interest by way of damages and special damages

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 whereby 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 contract to the contrary, the Court may award interest at such rate
a it think fit one 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 a case of a breach of the contract
on the part of the seller- from the date on which the payment was made.
This section preserves the right of a party to a contract of sale to recover special damages, that is
to say, compensation for any loss or damage caused to him by either party’s breach ‘which the
parties knew when they made the contract to be likely to result from the breach of it’.

These damages are contrasted with those which ‘naturally arose in the usual course of things’
from the breach. Generally speaking, the latter alone are recoverable by the plaintiff. However,
his rule is subject to limitations where the breach has occasioned a special loss, which was
actually in contemplation of the parties at the time of entering into the contract, that special loss
happening subsequently to the breach must be taken into account.Vr

In a case, the defendant agreed to sell and deliver a threshing machine to the plaintiff on 14
August. The plaintiff was a farmer and required the machine for threshing on August 14, a fact
that was well known to the defendant. The defendant however failed to deliver it, all the while
assuring the plaintiff he would deliver soon. On the basis of these assurances, the plaintiff did not
hire another thresher. The plaintiff was therefore obliged to stack the wheat, and while stacked, it
was damaged by the rain, and had to be dried in a kiln. The plaintiff was entitled to recover
damages as the cost of stacking wheat, the loss due to its deterioration by stacking, the damage
by rain and cost of drying, but he could not recover for the fall of the market price[xxiii].

Act 32 of 1839 provided for the payment of interest by way of damages in certain cases. Under
the Act, the court could allow interest on debts or certain sums payable by an instrument in
writing, from the time when the amount became payable where a time was fixed for payment, or
when no time was fixed, from the date on which the demand was made for payment in writing
giving notice to the debtor that interest would be claimed.

In the case of President of India v La Pintada Compania Navigacion SA[xxiv], the House of
Lords upheld the rule that common law does not permit interest being awarded by way of general
damages for delay in payment of a debt beyond the date if it became contractually due. However,
special damages may be awarded in respect of interest paid by the plaintiff as due to the
defendant, if the rule of remoteness is satisfied.

It will be observed that the seller can only recover interest when he is in a position to recover the
price. When he can only sue for damages for breach of contract, he is not entitled to interest
under the provisions of this sub-section.

Similarly, the buyer too can only recover interest when he is entitled to recover the purchase
price, that is to say, when he can sue for the price prepaid as money and received, by reason of
total failure, for consideration. He cannot recover interest when his only remedy is to sue for
damages, for instance for a breach of warranty, even though those damages may be sufficient to
extinguish the price. Moreover, he is only entitled to interest in the case of a breach of contract,
presumably by the seller. This limitation therefore, excludes cases arising under sections 7 and 8,
and presumably other cases where the contract is dependent upon some condition inserted for the
benefit of the seller, and is not performed owing to the non- fulfilment of that condition, or the
contract is frustrated by circumstances over which the seller has no control, so that in law he
would not be liable to an action.