Performance of the Contract under Sale of Goods Act, 1930 | Law Optional Notes for UPSC PDF Download

Introduction

• A contract of sale of goods as per the Sale of Goods Act, 1930 involves two parties - the seller and the buyer. The seller commits to transferring ownership of goods to the buyer in exchange for a price.
• Both parties are obligated to fulfill their responsibilities outlined in the contract. The seller is responsible for delivering the goods, while the buyer must accept and pay for them according to the contract terms.

Key Sections of the Sale of Goods Act, 1930

• Section 31 - Duties of seller and buyer: This section delineates the obligations of both the seller and the buyer in a sales contract.
• Section 32 - Payment and delivery are concurrent conditions: It establishes that payment and delivery should happen simultaneously.
• Section 33 - Delivery: Specifies the requirements for the delivery of goods.
• Section 34 - Effect of part Delivery: Explains the implications of partial delivery of goods.
• Section 35 - Buyer to apply for delivery: Outlines the buyer's responsibility to request delivery.
• Section 36 - Rules as to delivery: Provides guidelines regarding the delivery process.
• Section 37 - Delivery of wrong quantity: Deals with situations where an incorrect quantity of goods is delivered.
• Section 38 - Instalment delivery: Covers the delivery of goods in installments as agreed upon.
• Section 39 - Delivery to carrier or wharfinger: Discusses the option of delivering goods to a carrier or wharfinger.
• Section 40 - Risk where goods are delivered at a distant place: Determines the risk associated with goods delivered at a distant location.

This Act ensures that the sale of goods is conducted smoothly, with clear guidelines on delivery, payment, and responsibilities of the seller and buyer. Understanding these sections is crucial for both parties involved in a sales contract.

Seller's Duty to Deliver the Goods

• According to Section 31, the seller is obligated to deliver the goods in a contract of sale of goods. Delivery, as defined in Section 2(2), involves the voluntary transfer of possession of goods from one party to another.
• Delivery of goods can take various forms as agreed upon by the parties. It can be actual, symbolic, or constructive, as outlined in Section 33 of the Act.

Actual Delivery

• Actual delivery occurs when the goods specified in the contract are physically handed over from the seller to the buyer. Immediate delivery is not always necessary, as long as the buyer gains control over the goods.

Symbolic Delivery

• Symbolic delivery does not involve the physical transfer of goods. Instead, symbols representing the goods are transferred to enable the transferee to exercise control over them. For instance, transferring a warehouse key grants control over the goods stored within.

Constructive Delivery

• Constructive delivery occurs when there is neither actual nor symbolic delivery of goods. Instead, an action agreed upon by the parties is considered as the delivery of goods. This type of delivery is also known as fictitious delivery or delivery by attornment/acknowledgment.
• Constructive delivery can take various forms based on mutual agreement between the parties involved.

Constructive Delivery

• Definition of Constructive Delivery: Constructive delivery occurs when the seller, who possesses the goods, acts on behalf of the buyer, leading to a change in the legal status of the goods.
• Instances of Constructive Delivery:
  • When goods are already in the buyer's possession, held as a bailee or agent for the seller, and the seller agrees to transfer ownership to the buyer.
  • When goods are held by a third party on behalf of the buyer with mutual consent from both buyer and seller.
• Explanation with Examples: For instance, when a supplier fails to fulfill their obligation to provide goods as agreed, the fault cannot be attributed to the seller unless the supplier was legally obligated to make the supply.
• Case Study - CTI Group Inc. v. Transclear SA: In this case, it was determined that a supplier's default could only be linked to a seller if the supplier was legally bound to make the supply. If the supplier was not under a legal obligation and failed to provide the goods, the fault could not be assigned to the seller.

Rules Regarding Delivery

• Delivery according to contract:
  • The seller is obligated to deliver the goods as per the terms of the contract, including specifics about the time, place, and manner of delivery. These terms must be adhered to by the seller.
• Time of delivery:
  • When the contract is silent on delivery time, according to Section 32, the seller must be ready to deliver the goods upon payment, and the buyer must be prepared to pay upon delivery.
  • For instance, in the case of Vishnu Sugar Mills Ltd. v. Food Corporation of India, a statutory sale required prompt payment upon delivery of sugar. Changing this payment procedure unilaterally was deemed illegal by the Patna High Court.

Vishnu Sugar Mills Ltd. v. Food Corporation of India

• Buyer's Obligation to Request Delivery: As per Section 35 of the Sale of Goods Act, 1930, the buyer must request delivery of goods before the seller is expected to provide them. This request needs to be appropriately made. It is a requirement for both goods that are ready for delivery and those that will be available in the future. The buyer's demand for delivery is influenced by any specific contract terms.
• Buyer's Duty to Request Delivery: In the case of Food Corporation of India v. Arosan Enterprises Ltd., there was an agreement for the sale of sugar to a buyer who urgently required it for the Dussehra and Diwali festivals. Although the buyer agreed to extend the delivery date, the sugar was not provided as promised. The court ruled that due to the buyer's urgent need for the sugar during the festivals, he was justified in not agreeing to further extensions of the delivery period.
• Consequences of Delay in Delivery: Under Section 55 of the Indian Contract Act, 1872, if the seller delays the delivery of goods and time is of the essence in the contract, the buyer has the right to reject the goods. However, if time is not crucial to the contract, the buyer can only claim compensation for the delay.

Food Corporation of India v. Arosan Enterprises Ltd.

• Determining the Place of Delivery: Parties involved in a contract can mutually agree on the delivery location for goods. In the absence of a specific indication in the contract, such as in a sale, the delivery location defaults to where the goods are at the time of the sale. In cases of an agreement to sell, the place of delivery is where the goods are when the agreement is made. For future goods yet to be produced, delivery occurs where they are manufactured or produced.
• Place of Delivery According to Section 36(5) of the law, the costs related to preparing goods for delivery are typically the responsibility of the seller, unless there is a different agreement in place. This means that if the goods are not ready for delivery at the time of the contract, the buyer is obligated to accept the goods, and the expenses for preparing them for delivery should be covered by the seller. If the buyer ends up bearing these expenses, they can later seek reimbursement from the seller.
• Expenses of Delivery When it comes to the passing of property through part delivery, the agreement between the parties may specify when ownership of the goods transfers upon delivery. In situations where only a portion of the goods is delivered, a question arises: Does ownership transfer only for the delivered part or for the entire goods? Section 34 of the law addresses this scenario. It emphasizes that the circumstances surrounding the delivery need to be considered.
  The section outlines the following:
  • Delivery of a part of the goods during the process of delivering the whole has the same effect in transferring ownership of those goods as delivering the entire quantity.
  • However, if the delivery of a part is not a part of the ongoing delivery of the whole but is meant to separate that part from the whole, it does not result in the transfer of ownership of the remainder.

Hammond v. Anderson

• Delivery Process: In the legal case of Hammond v. Anderson, the seller asks the buyer to accept 1,000 bags of wheat. The buyer arranges transport to take 100 bags in each trip. However, before all bags could be delivered, 200 bags are taken in two trips, and the remaining bags are destroyed by a fire. The key point here is that when the buyer started transporting the goods, the property in all 1,000 bags would have passed to the buyer, making them responsible for the loss of the remaining bags.
• Delivery of Part Goods: If a buyer takes delivery of a part of the goods, it can be considered as the delivery of the whole. For instance, if a buyer weighs all the goods but only takes a portion of them, legally, it would be seen as taking delivery of the entire quantity.

Delivery of Goods in Wrong Quantity or Description

• Contractual Obligation: Sellers are obliged to deliver goods according to the terms of the contract, including quality, quantity, and description specified. If the goods are delivered in a quantity less than agreed upon, the buyer has the right to either accept or reject them.
• Rule of de minimis: The buyer's right to reject goods is subject to the de minimis rule, which overlooks trivial discrepancies. For instance, in the case of Barium Chemicals Ltd. v. Andhra Pradesh Mining Corporation Ltd., where there was a slight shortage in the quantity of rice supplied, the buyer was not allowed to reject the delivery based on this minor discrepancy.

Legal Cases Overview

Barium Chemicals Ltd. v. Andhra Pradesh Mining Corporation Ltd.

When the quantity of goods delivered exceeds the contracted amount:

• The buyer can choose to accept the goods as per the contract and reject the surplus.
• Alternatively, the buyer can reject the entire delivery.
• There's also the option to accept the entire delivery.

• This principle is guided by the legal concept of de minimis non curat lexis, meaning the law disregards trivial matters.

  Example: If a buyer orders 100 units of a product but receives 110 units, they can either return the extra 10 units or refuse the whole delivery.

Moore & Co. v. Landauer & Co.

Regarding installment deliveries:

• Normally, goods should be delivered in one lot as per Section 38(1).
• However, if agreed upon, deliveries can be made in parts.
• Section 38(2) emphasizes assessing contract terms and circumstances to determine breach extent.

• Factors to consider are breach proportion and likelihood of recurrence.

  Example: If a buyer orders 100 units to be delivered in two installments but only receives 50 units in the first delivery, they may have grounds to reject the incomplete delivery.

Instalment deliveries

• In the case of Moti Lal v. The Netha Cooperative Spinning Mills Ltd., a contract involved supplying 500 bales of a specific type of cotton.
• The buyer accepted the first instalment of 50 bales but rejected the second instalment due to adulteration with waste cotton and inferior quality.
• The buyer's rejection of the second instalment led to the justified repudiation of the entire contract.
• The sellers couldn't claim damages as they didn't provide further instalments within the contract period and agreed to the contract's repudiation.

Moti Lal v. The Netha Cooperative Spinning Mills Ltd.

• Delivery to Carrier or Wharfinger: When goods are delivered to the carrier or wharfinger without the right of disposal reserved, it's considered delivery to the buyer.
• The seller can rebut this presumption by reserving the right of disposal through a document of title in their name or a third party's name.
• If the seller fails to make a reasonable contract with the carrier or wharfinger, and goods are lost or damaged, the buyer can refuse the delivery to be to themselves or hold the seller liable.
• The seller must notify the buyer to enable insurance during sea transit if necessary.

Delivery to Carrier or Wharfinger

• In the legal case of InYoung v. Hobson, the sellers were supposed to send electric engines to the buyers via railway. However, they chose to send the engines at the buyer's risk instead of the railway's risk. Unfortunately, the engines got damaged during transit. Consequently, it was determined that the sellers' decision regarding the carriage contract was unreasonable, leading to the buyers having the right to reject the damaged engines.

Risk where goods are delivered at a distant place

• When goods are delivered to a distant location, as per Section 40 of the law, the seller's liability for loss or damage during transit does not cover deterioration inherent to the journey. For instance, in the case of Bull v. Robinson, hoop iron was sent from Staffordshire to Liverpool and rusted during transit. The court ruled that the seller was not accountable for this deterioration.

Bull v. Robinson

• For perishable goods sent to a distant place, it is crucial that they are not only fit for sale when dispatched but also retain their quality during transit and for a reasonable period afterwards. In the case of Beer v. Walker, rabbits sent from London were initially healthy but unsuitable for consumption upon arrival in Brighton. Consequently, the buyer had the right to refuse acceptance of the deteriorated rabbits.