Test: Sale of Goods Act - 1 - CLAT PG MCQ

In a contract of sale, it is permissible for delivery and payment to occur at different times or in installments as agreed upon in the contract. This flexibility allows for various arrangements that can accommodate the needs of both the buyer and seller.

A valid contract of sale requires an offer to buy or sell goods at a specified price, followed by acceptance from the other party. This establishes a legal agreement that can be enforceable in a court of law, whether made orally or in writing.

The risk generally passes to the buyer when the goods are identified in the contract and the property in the goods has been transferred. This means that once the goods are ascertained and the seller has fulfilled their obligations, the buyer bears the risk of loss or damage, even if they have not yet taken physical possession. This principle is important as it delineates the responsibilities of both parties in a transaction.

According to the Sale of Goods Act, "goods" are defined as every type of movable property, which includes stocks, shares, crops, and items that can be severed from the land. This broad definition allows for a wide range of items to be classified as goods, facilitating various transactions under the law. This classification is essential for ensuring clarity and consistency in commercial dealings.

For a third-party valuation to be valid, it must be provided by the third party as stipulated in the agreement. If the third party fails to perform the valuation, the contract may be deemed void, highlighting the importance of adhering to contract specifications.

In a divisible contract, if only part of the goods perishes, the remaining goods must still be accepted by the buyer. This reflects the principle that parties can still fulfill their obligations for the portion of the goods that remains intact. The buyer is only relieved from their obligations concerning the goods that have perished. This ensures that contracts can still be executed even when some portions of the goods are unavailable, promoting fairness and efficiency in commercial transactions.

An express condition is one that is explicitly stated and agreed upon by both parties in a contract. These conditions are essential for the contract's functioning and must be fulfilled as specified to avoid breaches.

While many contracts of sale may be in writing for clarity and enforceability, they can also be oral or implied. The key features include the involvement of two parties, movable goods, and the transfer of ownership.

When the seller reserves the right of disposal in a contract for the sale of specific goods, ownership does not transfer to the buyer until the specified conditions are fulfilled. This includes scenarios where the seller instructs a third party not to deliver the goods until payment is made. This provision protects the seller’s interests by ensuring that they retain control over the goods until they receive the agreed-upon compensation, fostering trust and security in commercial transactions.

Ownership in a hire purchase agreement transfers only after the hirer has made all installment payments, including the final one. This arrangement provides the hirer the option to terminate the agreement before ownership is fully transferred, highlighting the nature of bailment in such contracts.

In a sale or return scenario, ownership of the goods does not transfer to the buyer until they either consent to the purchase or take some affirmative action to adopt the transaction. If the buyer holds onto the goods without expressing intent to reject them, ownership may pass after a reasonable time or the expiration of a designated return period. This arrangement protects the buyer's interests by allowing them to assess the goods before finalizing the purchase.

A valid contract of sale must involve an agreement between competent parties, which means both parties have the legal capacity to enter into the contract, and their consent must be given freely without coercion. This is fundamental to enforceability.

If a buyer waives a condition, it is treated as a warranty. This means that the buyer can no longer enforce that condition but can still claim damages if a warranty is breached. This flexibility allows parties to adapt their agreements while still providing some level of protection.

A contract of sale is characterized by the immediate transfer of ownership from the seller to the buyer, whereas an agreement to sell indicates that the transfer of ownership will occur at a future date or upon fulfillment of certain conditions. This distinction is crucial in understanding the legal implications of each type of contract.

'Consideration' in a contract of sale is defined as the price paid by the buyer for the goods. It is a fundamental component of any contract, as it represents the value exchanged between the parties, making the contract enforceable under the law.

A breach of condition is a serious violation that allows the aggrieved party, usually the buyer, to treat the contract as repudiated. This means they can reject the goods and seek damages, as the condition is essential to the contract's purpose.

The primary distinction lies in the timing of ownership transfer: a sale occurs immediately, whereas an agreement to sell involves a future transfer or is contingent upon certain conditions being met. This understanding is crucial in contract law, as it affects the rights and obligations of both parties.

Constructive delivery occurs when the goods are transferred without a physical change in possession or custody. For example, if a buyer arranges for a third party to hold goods on their behalf, this is considered a constructive delivery. This concept is significant as it allows for flexibility in how goods can be transferred, accommodating various business practices and arrangements.

When specific goods perish without the seller's knowledge before the contract is formed, the contract is deemed void due to mutual mistake regarding a crucial fact. This principle underscores the impossibility of performance, as the subject matter of the contract no longer exists. In such cases, neither party can enforce the agreement, and it is treated as if it never existed. An interesting fact is that this principle protects both parties from being bound to an agreement based on a fundamental misunderstanding.

The principle of "Nemo Dat Quod Non Habet" translates to "no one can give what they do not have." This means that if a seller does not have ownership of the goods, they cannot transfer ownership to a buyer. The buyer's title will be subject to the same flaws as the seller's title. This principle is crucial in protecting the rights of original owners against unauthorized sales, ensuring that buyers cannot gain superior rights over the original owner.

'Perishing of goods' refers to situations where the goods either physically deteriorate or lose their merchantable quality, making them unsaleable. This can impact the obligations of the parties involved in the contract significantly.

A breach of warranty does not allow the buyer to reject the goods or void the contract; instead, the buyer can claim damages for the breach while still having to accept the goods. This reflects the secondary nature of warranties compared to conditions.

'General property' refers to full ownership rights over goods, meaning the owner has complete control and rights to the goods. This contrasts with 'special property,' where ownership rights are limited, such as in the case of a pledge.

An implied condition is one that is not explicitly stated but is understood to be part of the contract. When a buyer purchases goods based on a description, there is an implied condition that the goods must correspond with that description, ensuring the buyer receives what they expect.

The primary difference between a sale and a barter transaction is that a sale involves the exchange of goods for money, while barter involves the exchange of goods for other goods without the use of money. This fundamental distinction is crucial in commerce and legal transactions.

In a sale by sample, the bulk of the goods must correspond with both the sample and the description provided at the time of the contract. This ensures that the buyer receives goods that are consistent with what was promised, maintaining the integrity of the sale.

'Caveat Emptor' translates to "let the buyer beware," emphasizing that it is the buyer's responsibility to examine the goods before purchase. This principle protects sellers from liability for defects that the buyer could have discovered through reasonable inspection.

Future goods refer to those that are to be manufactured, produced, or acquired by the seller after the contract is made. Since these goods do not exist at the time of the contract, they cannot be the subject of an immediate sale, and thus, such agreements are classified as agreements to sell. This distinction is important for understanding the timing and nature of obligations in sales contracts.

If specific goods that are the subject of a contract perish before the sale is completed, the contract is rendered void. This is because the specific subject matter of the contract no longer exists, eliminating the possibility of fulfilling the agreement.

If specific goods perish after an agreement to sell but before the sale is completed, and without any fault from either party, the agreement becomes void. This situation exemplifies supervening impossibility of performance, where the goods can no longer fulfill the terms of the contract. Both parties are thus released from their obligations, emphasizing the principle that contracts must be based on existing and available subject matter.