“Under sale of goods act, 1930 by virtue of rights of unpaid seller (S 46) an unpaid seller is well protected against goods-illustrate & explain
Sale of Goods Act is one of very old mercantile law. Sale of Goods is one of the special types of Contract. Initially, this was part of Indian Contract Act itself in chapter VII (sections 76 to 123). The Indian Contract Act, 1872 embodied the simple and elementary rules relating to the sale of goods. The developments of modern business relations found the Indian Contract Act inadequate to deal with the new regulations or give effect to the new principles. Later these sections in Contract Act were deleted, subsequently the provisions relating to the sale of goods contained in the Indian Contract Act, 1872 was repealed and separate Sale of Goods Act was passed in 1930. Hence, the Sale of Goods Act came into force on 1st July, 1930.
The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act apply to contract of Sale of Goods also. Basic requirements of contract i.e. offer and acceptance, legally enforceable agreement, mutual consent, parties competent to contract; free consent, lawful object, consideration etc. apply to contract of Sale of Goods also.
Seller: Person who sells or agrees to sell.
Buyer: Person who buys or agrees to buy.
Goods: All kinds of movable property, except actionable claims.
In order to get a more detailed insight, ‘Goods’ can be defined as follows,
“…every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.
Sale: Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale.
Agreement to sale: Where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
Price: Consideration for the sale of goods in money. (When the consideration is only in goods then it is ‘barter’ and not ‘sale’.)
Transfer: Transfer of ownership of goods or agreement to that effect.
It is to be noted here that the Act has found several reviews and amendments to adapt to the new complex course of businesses. In 1993, for instance, the Multimodal Transportation of Goods Act was enacted.
Contract of Sale of Goods:
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.
– Sec. 4 (1), The Sale of Goods Act, 1930.
A contract of sale may be absolute or conditional.
– Sec. 4 (2), The Sale of Goods Act, 1930.
The essentials of a valid Contract of Sale:
Following are the essentials of contract of sale-
Ø It is contract, i.e. all requirements of ‘contract’ must be fulfilled
Ø It is of ‘goods’
Ø Transfer of property is required
Ø Contract is between buyer and seller
Ø Sale should be for ‘price’
Ø A part owner can sale his part to another part-owner
Ø Contract may be absolute or conditional.
Classification of Goods:
Sec. 6 of the Sale of Goods Act classifies ‘goods’ under following categories:
Existing goods: These are the goods which are owned or possessed by the seller at the time of sale.
Specific goods: These are identified and agreed upon at the time of sale.
Ascertained goods: Specific goods which become ascertained subsequent to the contract.
Unascertained or generic goods: These are not identified and agreed upon at the time of sale but defined only by description and may form part of the lot.
Future goods: These are not possessed by the seller at the time of the contract but which will be produced, procured, and supplied by him in the future. It is similar to the goods in an agreement to sell.
Contingent goods: These are of two types:
v Contingent goods and
v Contingent and future goods.
Contingent goods: The acquisition and supply of these goods depends upon certain conditions, such as arrival of a consignment. The seller is not liable for such goods since it is specifically under conditions.
Contingent and future goods: The procurement of contingent goods depends on a contingency, whereas it is not so in a future contingency. The parties are liable for production or procurement of goods. The promise, for instance, to produce and supply spare parts, must be delivered in the future.
Performance of the Contract:
It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale.
– Sec. 31, The Sale of Goods Act, 1930
The performance of contract is a simple transaction where the seller delivers the goods and the buyer pays. If there is something more complex, then this is stated in the contract as special terms.
Seller- Delivers goods and receives consideration.
Buyer- Accepts and pays for the goods.
Terms- Contract can have terms of delivery and payment.
Delivery of Goods:
Delivery of goods may be defined as voluntary transfer of possession of goods from seller to the buyer.
Modes of Delivery:
§ Actual delivery: The goods are handed over by the seller to the buyer or to his authorized agent; it has the effect of putting the goods in the possession of the buyer: Sec. 33.
§ Symbolic delivery: The goods are too bulky and unwieldy such as large machinery, where a symbolic passing of documents or keys and the like demonstrate the transfer of goods.
§ Constructive or delivery by attornment: A third party (bailee) who is inpossession of the goods of the seller at thetime of sale acknowledges to the buyer that he holds the goods on his behalf: Sec. 36(3).
Delivery of goods and payment of the price are concurrent conditions. But in the world of seller–buyer interaction, it adjusts itself to the prevailing conditions.
Rules as to delivery of goods:
(1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are to be delivered at the place at which they are the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, if not then in existence, at the place at which they are manufactured or produced.
(2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.
(3) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf.
(4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.
(5) Unless otherwise agreed, the expense of and incidental to putting the goods into a deliverable state shall be borne by the seller.
Rights and Duties of the Buyer:
Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.
– Sec. 41, The Sale of Goods Act, 1930
The acceptance or rejection by the buyer creates certain rights and duties. The law protects the buyer in terms of his rights to examine the goods and at the same time obliges him to be a responsible buyer by limiting him to certain liabilities when he rejects the goods.
There also arise issues of what the seller will do if his goods are not accepted by the buyer. The biggest problem for the seller is what to do with the goods that have been transported to distant places. Exporters very often suffer these problems. Companies in the developed countries often reject goods from the companies in developing countries. More often than not the reasons are familiar: Substandard quality, adulteration, and delayed arrival.
Rights of Unpaid Seller:
The seller of goods is deemed to be an ‘unpaid seller’ within the meaning of this Act—(a) When the whole of the price has not been paid or tendered. (b) When a bill of exchange or other negotiable instrument has been received as conditional payment and the conditions on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.
– Sec. 45(1), The Sale of Goods Act, 1930
In Sec. 45 of the Sale of Goods Act, these define an unpaid seller: One who is not paid, and even if paid the payment is conditional. All the negotiable instruments are essentially conditional and until they are honored, the seller remains bereft of payment. The same section further declares that the term seller holds good also for one who is the representative of a seller such as an agent who has the responsibility to sell goods and collect payments.
Rights of an Unpaid Seller can be more precisely understood from the following charts:
Chart-1: Distinction rights of unpaid seller
Chart-2: Rights of unpaid seller against goods
Chart-3: Rights of unpaid seller against the buyer personally
Hence, Section 46 in the Sale of Goods Act, 1930 is:
46. Unpaid seller’s rights.-
(1) Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law-
(a) A lien on the goods for the price while he is in possession of them;
(b) In case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them;
(c) A right of re-sale as limited by this Act.
(2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of with- holding delivery similar to and co- extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.
So an unpaid seller, when the property has passed to the buyer, has the following rights,
· Seller’s lien:
Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely :-
(a) Where the goods have been sold without any stipulations as to credit.
(b) Where the goods have been sold on credit, but the term of credit has expired.
(c) Where the buyer becomes insolvent.
Rules regarding seller’s Lien:
i. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.
ii. If the goods have been sold on credit, the seller cannot refuse to part with possession unless the term of credit has expired.
iii. Lien can be exercised for non-payment of the price, not for any other charges.
iv. Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien.
v. The seller can abandon or waive the lien if he so desires.
vi. The unpaid seller does not lose his lien by reason only that he has obtained a decree for the price of the goods.
Loss of Right of Lien:
The unpaid seller of goods loses his lien thereon-
(a) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;
(b) When the buyer or his agent lawfully obtains possession of the goods;
(c) By waiver thereof.
· The Right of Stoppage in Transit:
Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price.
Rules regarding the course of transit:
i. Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee.
ii. The right of stoppage in transit comes to an end as soon as the goods are delivered to the buyer or his agent. The carrier may become the agent of the buyer under some circumstances.
iii. If the carrier wrongfully refuses to deliver the goods to the buyer’s the transit is at an end, and the seller’s right is lost.
iv. Where a part delivery has been made, the remainder of the goods may be stopped in transit unless it is shown that the part delivery was made under such circumstances as to show an agreement to give up possession of the whole of the goods.
· The Right of Resale:
The unpaid seller who has retained possession of the goods in exercise of his right of lien or who has resumed possession from the carrier upon insolvency of the buyer, can resell the goods.
a) Where the goods are of a perishable nature, or
b) Where the un-paid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re- sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re- sale, If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re- sale.
Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer.
Where the seller expressly reserves a right of re-sale in case the buyer should make default, and, on the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages.
On the other hand, when the property has not passed to the buyer, an unpaid seller has the right of stoppage in transit (as discussed earlier) or the right to withhold delivery.
By implementing the right to withhold delivery, an unpaid seller can refuse to deliver the sold goods.
Again, the rights of unpaid seller against the buyer personally consist of the following,
· Suit for the Price:
(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.
· Suit for Damages:
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non- acceptance.
· Repudiation of contract:
When the buyer repudiates the contract before the delivery date, the seller may sue the buyer under the given conditions.
· Claim for Interest and Special Damages:
The seller may recover interest or special damages in any case where by law interest or special damages may be recoverable. He may also recover the money paid where the consideration for the payment of it has failed. – Sec. 61.
An unpaid seller has certain rights under the sale of goods act, 1930. These rights give him protection against the fact that he has not been paid. An unpaid seller is well protected against goods in the sense that his legal rights give him the authority to retain the ownership of the goods in certain cases, or to stop the delivery of the goods or resell them or take such actions in other cases. So, an unpaid seller though did not receive the price for his goods but still has certain rights on his goods. The rights of unpaid seller protect him from incurring the huge loss of not receiving the payment for his goods. It either makes sure that the seller is duly paid or it prevents him from losing his goods without being paid. Thus it can be concluded that by virtue of rights of unpaid seller, an unpaid seller is well protected against goods.
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