PAHUJA LAW ACADEMY

Topic – Rules as to transfer of property [19-24]

And

Risk passes with the property [Section 26]

MAINS QUESTIONS

1. “There are definite rules for ascertaining the intention of the parties as to time when the property in the Specific Goods is to pass to the buyer.” Discuss.

 

2. Risk passes with the property? Explain.
3. Mr XYZ (seller) agreed to supply 300 tons of apple juice by samples. He crushed 300 tons of apples at once to ensure that they are according to the samples and filled them in the casks. After some installments had been delivered, the buyer refused to take further deliveries.

 

4. “X, a seller of the goods, enters into a contract of sale of goods with Y, the buyer, who visits X’s office to check the goods. Both the parties to the contract agree that transfer of ownership will take place with the execution of the contract, restricting X’s right to sell those goods to someone else. They both agree X will bring the goods in the deliverable state in 2 days and after two days, Y’s agent will collect the goods from X. Both the parties agree that X will take care of Y’s goods for 5 days after the contract has been executed (if not collected) and not beyond the period of 5 days. Decide.

 

5. P entrusted his bike to M , an auctioneer ,for sale by public auction on the term that M would not sell it below Rs.70,000. M sold it to Q for Rs.30,000 in private sale and misappropriated the amount and absorbed and absconded. Can P recover the bike from B ? Decide .

 

6. Goods were delivered to the buyer on approval. After three months the same were stolen from the godown of the buyer. The seller filed a suit for the price of the goods. Buyer pleaded that the property in the goods had not passed to him. Decide giving reasons.

 

7. Explain with the help of case law – “stipulation as to time of payment and its importance in commercial contracts.

 

 

 

DIFFERENCE BETWEEN SALE AND HIRE PURCHASE

1. In a sale, property in the goods is transferred to the buyer immediately at the time of contract, whereas in hire-purchase, the property in the goods passes to the hirer upon payment of the last installment.
2. In a sale, the position of the buyer is that of the owner of the goods but in hire purchase, the position of the hirer is that of a bailee till he pays the last installment.
3. In the case of a sale, the buyer cannot terminate the contract and is bound to pay the price of the goods. On the other hand, in the case of hire-purchase, the hirer may, if he so likes, terminate the contract by returning the goods to its owner without any liability to pay the remaining installments.
4. In the case of a sale, the seller takes the risk of any loss resulting from the insolvency of the buyer. In the case of hire purchase, the owner takes no such risk, for if the hirer fails to pay an installment, the owner has the right to take back the goods.
5. In the case of a sale, the buyer can pass a good title to a bonafide purchaser from him but in a hire-purchase, the hirer cannot pass any title even to a bonafide purchaser.
6. In a sale, sales tax is levied at the time of the contract whereas in a hire-purchase, sales tax is not leviable until it eventually ripens into a sale (K.L. Johar & Co. vs. Dy. Commercial Tax Officer).



There are 3 exceptions to the above Rules

1. Subject to Contract :- Rule under section 26 is subject to Contract
2. Proviso (1) to Section 26

   If loss is caused by delay- then defaulter is liable

3. Proviso (2) to Section 26

Nothing is section 26 shall affect the duties of either buyer or seller as bailee.

 

 

PAHUJA LAW ACADEMY

Pre- Questions

 

1. Under section 19 of the Sale of Goods Act, 1930, the property in goods in a contract for sale of specific or ascertained goods, passes to the buyer

a.  when the contract is made

b.  when the parties intend the property in goods to pass

c.  when the goods are delivered

d.  when the price is paid

 

2. For the purpose of ascertaining the intention, of the parties under section 19 regard shall be had to

a. The terms of the contract

b.  The conduct of the parties

c.  The circumstances of the case

d.  All of the above

 

3. Which of the following is/are goods within the meaning of the Sale of Goods Act, 1930?

a. Water

b. Gas

c. Oil

d. All of the above

 

4. Which of the following sections of the Sale of Goods Act 1930 deals with Sale of unascertained goods and appropriation’?

a. Section 22

b. Section 23

c. Section 24

d. Section 25

 

5. Section 23 of the Sale of Goods Act, 1930 applies to

a. ascertained goods

b. specific goods

c. unascertained goods

d. all the above

 

6. Risk……. passes with property.

a. Always

b. Prima facie

c. Usually

d. None of the above

 

7. In case of loss of goods, the loss shall be borne by the party who has the ……………… of the goods at the time of loss.

a. Possession

b. Ownership

c. Either (a) or (b)

d. None of the above

 

8. Section 20 of the Sale of Goods Act,1930 provides for, passing of property in goods where

a. there is an unconditional contract for the sale of specific goods but not in a deliverable state

b. there is a conditional contract for the sale of specific goods in a deliverable state

c. there is an unconditional contract for the sale of generic goods

d. there is an unconditional contract for the sale of specific goods in deliverable state.

 

9. Assent to the appropriation of goods to the contract of sale of goods, under section 23 of the Sale of Goods Act,1930, can be given

a.  only before and not after the appropriation .

b. either before or after the appropriation

c. after the appropriation

d. before the appropriation

 

10. Section 26 of the Sale of goods Act ,1930 lays down the rule

a. risk follow the defaulter

b. risk follows the delivery

c. risk follows the property

d. all of the above

 

11. The passing of title in a sale of specific goods in a deliverable state dependent on

a. Payment of price

b. Time of delivery

c. Both (a) and (b)

d. None of the above

 

12. Delivery may be of how many kinds

a. 2

b. 3

c. 4

d. 5

 

13. Which section deals with “specific goods to be put in to a deliverable state”

a. Section 18

b. Section 19

c. Section 20

d. Section 21

 

14. Normally risk follows

a. Possession

b. Ownership

c. Both

d. None

 

15. The assent under section 23 SOGA be given

a. Before the appropriation is made

b. After the appropriation is made

c. Either a & b

d. None of the above

 

16. The assent u/section 23 can be

a. Expressed

b. Implied

c. Either a & b

d. None of the above

 

17. In view of sections 23 and 39 of SOGA when the goods are handed over to the transporter

a. The property has been passed to the buyer

b. The property has not been passed to the buyer

c. The property will pass to the buyer only when he takes goods

d. None of the above

 

18. A contracts to sell to B a certain quantity of liquor out of a big cask containing a much larger quantity. The required quantity is not separated or bottled. Here

a. The property in liquor passed to purchaser

b. The property in liquor does not passed to purchaser

c. The property in liquor passed to purchaser at the time of contract

d. None of the above

 

19. In recent times, the law relating to sale of goods is developing through

a. Commercial disputes

b. Civil disputes

c. Tax and excise cases

d. None of the above

 

20. Whether SOGA is exhaustive or not?

a. Yes

b. No

c. Depends

d. None of the above

 

Topic – Section – 27

LECTURE – 3

[Sale by non- owner]

MAINS QUESTIONS 

1. Discuss “Nemo dat quad non habet” with exceptions.

 

2. If you contract to sale pass and if the description of article tendered is different in any respect, it is not the article bargained for and the other party should not be bound to take it. comment .

Decide the case in the light of section 27 of the Indian Sale of goods Act.

 

3. “No one can give a better title than he himself has”.  Discuss and illustrate the exceptions under this rule.

 

4. What is the maxim caveat emptor.

 

5. X in Madras writes a letter to Y to send a packet of patent medicine. Y accordingly sends the packet but X finds defects in medicines. Can X receive the price of medicine from Y.

 

6. The Rule of Caveat Emptor does not mean that the buyer must take a chance, it means that the buyer must take care. Explain with exceptions, if any.

 

7. Sam in Madras writes to Sanju at Bombay to send to Sam a packet of patent medicine. Sanju

   Accordingly sends the packet . Sam finds some defects in the medicines . Decide whether Sam receives the price of medicines from Sanju .

 

8. Ajay purchased a packet of shampoo from Dev , a dealer in shampoo. His hair was abnormally sensitive and he had disclosed that fact to Dev. However, he suffered from hair trouble as a result of using the shampoo on the other hand his friend Vikas who was using the same shampoo for a long time had no such problem.

   Decide can Ajay claim damages from Dev.

 

 

Sales of Goods Act

SECTION 14- IMPLIED UNDERTAKING AS TO TITTLE

Section 14(a)- the implied condition as to title as ‘in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass’.

This means that the seller has the right to sell a good only if he is the true owner and holds the title of the goods or is an agent of the title holder.

When a good is sold the implied condition for the good is its title, i.e. the ownership of the good. If the seller does not own the title of the said good himself and sells it to the buyer, it is a breach of condition. In such a situation the buyer can return the goods to the seller and claim his money back or refuse to accept the good before delivery or whenever he learns about the false title of the seller.

Rowland v Divall, 192210 – The plaintiff had purchased a car from the defendant and was compelled to return it to the true owner after having used it for a while. The plaintiff then sued the defendant for the purchase money, since the defendant didn’t receive the consideration as per the condition of the title of ownership.

Sale by Description (Section 15)

Section 15 of the Sale of Goods Act, 1930 explains that when a buyer intends to buy goods by description, the goods must correspond with the description given by the buyer at the time of formation of the contract, failure in which the buyer can refuse to accept the goods.

Sale by sample as well as Description (Section 15)

When the sale of goods is by a sample as well as a description the bulk of the goods should correspond with both, i.e. description and sample provided to the seller in the contract and not only sample or description.

Condition as to Quality or Fitness (Section 16)

The doctrine of Caveat Emptor is applicable in the case of sale/purchase of goods, which means ‘Buyer Beware’. The maxim means that the buyer must take care of the quality and fitness of the goods he intends to buy and cannot blame the seller for his wrong choice. However, section 16 of the Sale of Goods Act 1930 provides a few conditions which are considered as an implied condition in terms of quality and fitness of the good:

1. When the buyer specifies the purpose for the purchase of the good to the seller, he relied on the sound judgment and expertise of the seller for the purchase there is an implied condition that the goods shall comply with the description of the purpose of purchase.
2. When the goods are bought on a description from a person who sells goods of that description (even if he doesn’t manufacture the good), there is an implied condition that the goods shall correspond with the description. However, in case of an easily observable defect that is missed by the buyer while examining the good is not considered as an implied condition.

 

Rule of Caveat Emptor

• Caveat Emptor means buyer beware
• This rule of Caveat Emptor is applicable in India under section 16 of SOGA
• Exceptions to the Rule of Caveat Emptor i.e. cases in which seller is responsible, if the goods are not of good quality or not fit for particular purpose.

 

(1) Exception

Section 16(1) —When buyer relies upon seller skill or judgment by disclosing his purpose and

seller is dealer in those goods.

Except – where buyer mentions the trade name.

 

(2) [Section 16(2)] — when goods are brought by description.

Except – where defects are patent then no liability of seller.

 

(3) [Section 16(3)— ]an implied condition or warranty as to quality or fitness may be annexed by the usage of trade.

• This rule has been modified by virtue of Consumer Protection Act, by making the seller responsible

 

Sale by Sample (Section 17)

When the goods are to be supplied on the basis of a sample provided to the seller by the buyer while the formation of a contract the following conditions are implied:

• Bulk supplied should correspond with the sample in quality

• Buyer shall have a reasonable opportunity to compare the goods with the sample

• The good shall be free from any apparent defect on reasonable examination by the buyer.

 

SECTION 27-SALE BY PERSON WHO IS NOT THE OWNER

• Section – 27 deals with transfer of title. It provides general rule, that in case of Sale by non- owner, buyer acquires defective title.

 

• This general rule is subject to some exceptions.

 

• General rule protects the interest of the owner but exceptions protect the interest of innocent buyer.



Pre- Questions

 

1. Which of the following is an exception to the rule Nemo dat quod non habet?

a. Sale by estoppel

b. Sale by mercantile agent

c. Sale by one of several joint owners

d. All of the above

 

2. Which of, the following sections of the Sale of Goods Act, 1930 deals, with ‘sale by person in possession under voidable contract’?

a. Section 29

b.  Section 30

c. Section 31

d. Section 32

 

3. Which of the following is an essential requirement of section 29 of the Sale of Goods Act?

a. Seller obtained the possession under a voidable contract

b. Contract must not have been rescinded

c. Buyer must act in good faith

d. All of the above

 

4. The Latin maxim “nemo dat quid habet” as contained in section 27 of the sale of Goods Act, 1930 means

a. a finder of goods can pass a proper title.

b. an innocent occupier of goods can pass a proper title

c. no man can pass a better title than he has

d. an innocent and bona fide purchaser gets a proper title as of a true owner

 

5. The consent in section 27 contemplates

a. consent of price

b. consent of goods

c. consent in fact

d. none of above

 

6. The rule in the Latin maxim “nemo dat quod non habet” under the Sale of Goods Act,1930 is contained in

a. section 27

b. section 28

c. section 29

d. section 30

 

7. Section 27 of the Sale of Goods Act, 1930 provides for

a. transfer of property in goods

b. transfer of title in goods

c. transfer of risk in goods

d. all of above

 

8. Which of the following sections contains the exceptions to the principle that “no man can pass a better title than he has”

a. Section 28 to 30

b. Section 27-30

c. Section 29 -31

d. Section 26 -30

 

9. Section 11 of the Sale of Goods Act, 1930 provides for

a. Stipulation as to time in a contract of sale

b. Conditions

c. Warranties

d. All the above

 

10. In mercantile contracts stipulations as to time, other than as regards time of payment are

a. usually not of the essence of the contract

b. usually of the essence of the contract

c. depends upon the terms of the contract

d. both (a) and (c)

 

11. A ‘condition’ in a contract of sale, in the Sale of Goods Act, 1930, has been defined under

a. section 12(1)

b. section 12(3)

c. section 12(2)

d. section 12(4)

 

12. ‘A breach of condition may be treated as a breach of warranty and not vice versa’. The statement is

a. True

b. False

c. Depends

d. None of the above

 

13. Which of the following is/are exceptions to the rule of caveat emptor?

a. Fitness for buyer’s purpose

b. Merchantable quality

c. Conditions implied by usage of trade

d. All of the above

 

14. Caveat emptor means

a. Let the seller beware

b. Let the buyer beware

c. Let the parties beware

d. None of the above

 

15. Under section 16 of the Sale of Goods Act,1930 in a contract of sale of goods, ordinarily

a. there is an implied warranty or condition as to the quality or fitness for any purpose of goods

b. there is no implied warranty or condition as to the quality or fitness for any purpose of goods

c. there is an implied condition as to the quality or fitness for any particular purpose of goods

d. there is an implied warranty as to the quality or fitness for any particular purpose of goods

 

16. Section 17 of the Sale of Goods Act,1930 provides for implied conditions in a contract of sale of good

a. at least half of the goods shall correspond with the sample

b. some of the goods shall correspond with the sample

c. the whole of the goods shall correspond with the sample

d. the bulk of the goods shall correspond with the sample.

 

17. Section 16 of the Sale of Goods Act ,1930 saves any condition or warranty that may arise

a. under any other law

b. under any other provisions of the act

c. Both (a) and (b)

d. neither (a) nor (b)

 

18. The implied condition as contained in section 16(2) of the Sale of goods Act ,1930 applies to

a. Sale of goods under a patent or other trade name

b. Sale of goods by description only

c. Both (a) and (b)

d. only (a) and not (b)

 

19. The exception provided under section 16 (1) of the Sale of Goods Act,1930, to the rule of “caveat emptor” is not applicable where

a. the goods are not in case and the buyer has no opportunity to inspect the same

b. the goods are in case and the buyer has actually inspected them.

c. inspected the same

d. neither (a) nor (b) or (c)

 

20. SOGA contains how many chapters

a. 6

b. 7

c. 8

d. 9

 

Sales of Goods Act

 

Topic – Unpaid Seller

 

Mains Question

 

1. Discuss the rights of an unpaid seller.

[OR]

Explain the provisions relating to unpaid seller’s lien and stoppage in transit?

2. In what cases has an unpaid seller a lien over the goods? Would his lien he destroyed if he makes part delivery of the goods? When does the lien come to an end.

3. X sold to Y a scooter for a sum of Rs 50,000 , Y pays the whole price except Rs 10,000 which he promised to pay within ten days . X holds the possession over the scooter until the rest of money is paid , but before the expiry of the stipulated time Y becomes  bankrupt . X resold the scooter to R for Rs 60,000 without giving notice to Y. Y claims from X Rs 10,000 i.e profit on re-sale.Decide Is X liable.

4. “The notion of transit is both a matter of fact as well as of law” as regards stoppage in transit by an unpaid seller. Explain this statement and refer to case law.

5. Ram sells 1000 packet of biscuits to Dev and send 800 by car and 200 by ship. Dev receives delivery of the packets of biscuits by ship. But before he receives the delivery of the packets by Car , he becomes insolvent . Ram,still being unpaid ,stops the goods in transit. The official Receiver in Dev’s insolvency claims the goods.

Decide .

 

LECTURE NOTES

Topic – Unpaid Seller

Section 46, Unpaid Seller has following rights against goods

1. Lien
2. Right of Stoppage in transit

• Right of re-sale

The Unpaid Seller has followings Rights against the buyer

• Suit for price [Section 55]
• Suit for damages for non-acceptance [Section 56]
• Repudiation of contract before due date [Section 60]
• Suit for Interest [Section 61]

 

SECTION 45

An unpaid seller as a seller that has not been paid the full price of the goods that have been sold or that has received a bill of exchange or other negotiable instrument as conditional payment, and the condition on which it was received has not been fulfilled.

Interestingly, the position of the seller’s agent may sometimes be akin to that of the seller insofar as exercising the rights of an unpaid seller are concerned.

For instance, an agent of the seller to whom the bill of lading has been endorsed or who has paid the price of the goods or is directly responsible to the seller for the price of the goods is also deemed to be an unpaid seller.

 

RIGHTS OF UNPAID SALLER

The rights provided to an unpaid seller, under the Act, are dependent on whether the property in the goods has passed to the buyer or not. An unpaid seller of the goods, the property in which has passed to the buyer, in entitled to exercise the following rights:

a. Right of lien on the goods for the price while he is in possession of them;

b. Right to stop the goods in transit after he has parted with the possession of the goods (incase the buyer becomes insolvent); and

c. Right to re-sell the goods (subject to the goods being of a perishable nature or the unpaid seller exercising its right of lien or stoppage in transit).

 

RIGHT TO LIEN

An unpaid seller of the goods, who is in possession of them, is entitled to retain possession, i.e. exercise a right of lien over the goods, in the following cases:

a. Where the goods have been sold without any stipulation of credit;

b. Where the goods have been sold on credit but the term of credit has expired;

c. Where the buyer becomes insolvent.

 

Further, an unpaid seller is also entitled to exercise its right of lien if he is in the possession of the goods as an agent of the buyer or the bailee for the buyer.

 

The term lien implies that the property in the goods has vested in the buyer, because no man can have a lien on his own goods. A lien necessarily presupposes that the property in the goods has passed, as the seller cannot be said to possess a right of lien on his own property, which is in the nature of a right of distress over the property of another.

 

It is settled law that the question of lien in respect of the goods, it is apparent that an unpaid seller has a lien on the goods for the price “while he is in possession of them”. Therefore, if the unpaid seller does not have possession of the goods, he cannot have lien on such goods.

This view has also been upheld by the Hon’ble High Court of Delhi in the judgment titled as “Pawan Hans Helicopters Ltd. vs. Aes Aerospace Ltd”.

 

In addition to an unpaid seller losing the possession of the goods, the Act also provides for the following specific situations, in which an unpaid seller loses its right of lien, i.e. when:

a. The unpaid seller 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. The buyer or his agent lawfully obtains possession of the goods;

c. The unpaid seller has waived its right of lien over the goods.

However, in the presence of a contractual stipulation, an unpaid seller’s lien, recognized in terms of Section 46 and 47 of the Act, may not stand terminated upon delivery of the goods to the carrier.

Pre- Questions

 

1. Rights of an unpaid seller against the goods, under the Sale of Goods Act, 1930, have been prescribed in A

(a) Chapter V

(b) Chapter VI

(c) Chapter VII

(d) Chapter IV

 

2. Chapter V of the Sale of Goods Act, 1930 provides for

(a) rights of unpaid seller against the buyer

(b) rights of unpaid seller against the goods

(c) rights of unpaid seller against the carrier

(d) all the above

 

3. ‘Unpaid seller’ of goods has been defined under

(a) section 45 of the Sale of Goods Act, 1930

(b) section 44 of the Sale of Goods Act, 1930

(c) section 47 of the Sale of Goods Act, 1930

(d) section 46 of the Sale of Goods Act, 1930

 

4. Under section 45 of the Sale of Goods Act, 1930, a seller of goods is an ‘unpaid seller’ when

(a) part of the price has not been paid

(b) substantial portion of the price has not been paid

(c) the whole of the price has not been paid

(d) either (a) or (b) or (c)

 

5. After the passing of property in goods to the buyer, under section 46 of the Sale of Goods Act, 1930, the unpaid seller has a right of

(a) lien over the goods

(b) stoppage of goods in transit

(c) re-selling the goods

(d) all the above

 

6. The right of lien is lost by the unpaid seller, under the circumstances stated in

(a) section 47 of the Sale of Goods Act, 1930

(b) section 48 of the Sale of Goods Act, 1930

(c) section 49 of the Sale of Goods Act, 1930

(d) section 50 of the Sale of Goods Act, 1930.

 

7. The unpaid seller of goods can waive his right to lien

(a) expressly

(b) impliedly

(c) either expressly or impliedly

(d) only expressly and not impliedly

 

8. Right of the unpaid seller, as to stoppage in transit against the goods has been provided under

(a) section 52 of the Sale of Goods Act, 1930

(b) section 51 of the Sale of Goods Act, 1930

(c) section 50 of the Sale of Goods Act, 1930

(d) section 49 of the Sale of Goods Act, 1930

 

9. Duration of transit of goods has been provided under

(a) section 51 of the Sale of Goods Act, 1930

(b) section 52 of the Sale of Goods Act, 1930

(c) section 49 of the Sale of Goods Act, 1930

(d) section 50 of the Sale of Goods Act, 1930.

 

10. The unpaid seller, under section 52 of the sale of goods act 1930, can exercise his right of stoppage in transit , against the goods by

(a) taking actual possession of goods

(b) giving notice of his claim to the carrier in whose possession the goods are

(c) only (a) not (b)

(d) either (A) or (b).

 

11. A contracts to make deliver a set a false teeth to B. the false teeth do not fit in the mouth of B. Here

(a) B is entitled to reject the goods

(b) B is not entitled to reject the goods

(c) B has no remedy

(d) None of the above.

 

12. The firs exception to the principle of caveat emptor (buyer rely on his own skill and judgment is applicable to

(a) Question of fact

(b) Question of law

(c) Mixed question of fact and law

(d) None of the above.

 

13. Section 16(2) of the Sale of Goods Act is applicable to

(a) First hand goods only

(b) Second hand goods only

(c) Both (a0 and (b)

(d) None of the above .

 

14. Chapter III of the Sale of Goods Act, 1930 deals with

(a) Formation of the contract

(b) Conditions and Warranties

(c) Performance of contract

(d) Effects of contracts.

 

15. Gardiner v Grey is a leading case on…..

(a) Bulk must correspond to sample

(b) Merchantability

(c) Passing of possession

(d) None of the above.

 

16. How long the implied conditions as to fitness of the goods exist?

(a) Life long

(b) Only at the time of sale

(c) One year

(d) None of the above.

 

17. A lady purchased a second – hand type writer, she used it for sometime and spent some money for its repair. But it is re-possessed by the true owner

(a) Buyer may not get compensation since goods are second hand

(b) Buyer may get compensation and cost of repair

(c) Buyer may get the price paid only

(d) None of the above.

 

18. ‘it is safe to say that the future foods for the purpose of passing of property can never be specific. The statement is

(a) True

(b) False

(c) Depends

(d) None of the above.

 

19. Under section 24 of the Sale of Goods Act 1930, the property passes to the buyer by.

(a) Acceptance

(b) By failure of return

(c) Both (a) and (b)

(d) None of the above.

 

20. On failure to return within specified time, the property passes to the….

(a) Seller

(b) Buyer

(c) Depends

(d) None of the above.