Law related to Sale of Goods Act

By Team Legal Helpline India, March 29, 2018

A brief write up on the law related to sale of goods act and the remedies under the sale of goods act, by our legal experts for the understanding of a common man.

The remedies under the Indian sale of Goods Act are devised for the protection of the interest of both buyer and seller. ‘Buyer’, as defined in Section 2(1) of the Act, means a person who buys or agrees to buy goods, and ‘Seller’ means, according to Section 2(13), a person who sells or agrees to sell goods.

The term ‘goods’ has been defined in Section 2(7) of the Act: ‘goods’ means 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 contract of sale.

REMEDIES OF SELLER

The remedies available to the seller under the law related to Sale of Goods Act may be classified into two categories

(A) Remedies against buyer personally.
(B) Remedies against the goods sold.
(A) REMEDIES AGAINST BUYER PERSONALLY

A seller has the following remedies against the buyer personally:

(1) Suit for price.
(2) Suit for damages for non-acceptance.

1. Suit for Price under the Law related to Sale of Goods Act

The unpaid seller has a remedy under Section 55 by way of suit for price against the purchaser, when:
(1) (a) there is a contract of sale of goods, and
(b) the property in the goods has passed to the buyer, and
(c) the buyer wrongfully neglects or refuses to pay for the goods according to the contract.
(2) Even if the property in the goods has not passed to the buyer and the goods have not been appropriated to the contract, the seller can sue the buyer for the price of the goods if the buyer unlawfully neglects or refuses to pay, provided under a contract of sale the price is payable on a certain day irrespective of delivery.

Where in a case before the Supreme Court the property in the goods had passed to the buyer on delivery of the goods to the Railways and the seller being thereafter not responsible for deterioration of the goods in transit, it was held that the seller was entitled to recover the agreed price without any deduction for the deterioration. This is one of the most important aspects of the Law related to Sale of Goods Act.

Award of Interest

Section 61(2) which deals with this matter provide as follows:
61(2) In the absence of a contract to the contract, the court may award interest at such rate as it thinks fit on 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.


In the above case the buyer had defaulted in payment of the price and did not dispute its liability to ay interest but it being a Government institution (COD, Kanpur), its only plea was that in the notice under Section 80 of the Code of Civil Procedure which was served on the respondent, there was no claim of interest and as such the same should not be allowed.

This defense was negatived. The court upheld the decision of the Patna High Court in B.B. Boss v. National Coal Trading Co. where also interest on late payment of price was allowed though there was o claim of interest in the demand notice. The Rajasthan High Court found in M.K.M. Moosa Bhai Amin v. Rajasthan Textile Mills that the District Judge had not allowed the claim as to interest on the ground that there was no stipulation in the contract for payment of interest on the unpaid price.

The High Court allowed reasonable interest at the rate of six per cent. The Supreme Court laid down that “on a conspectus of all the decisions and the provisions of Section 61(2) we are constrained to hold that the plaintiff is entitled to get a decree of interest on the unpaid price @ 6 per cent annum which is considered to be a reasonable rate of interest. The entire principle is thus governed by the Law related to Sale of Goods Act.

2. Suit for damages for non-acceptance

Section 56 of the Act provides that where the buyer wrongfully neglects or effuses to accept and ay for the goods, the seller may sue him for damages for non-acceptance. This section does not provide as to how damages for non-acceptance are to be assessed. It depicts another aspect of the Law related to Sale of Goods Act.

The principles for assessment of damages are laid down in Section 73 and 74 of the Indian Contract Act, 1872, and the same principles would be equally applicable. Where the goods are easily saleable n the market, the principle applicable is that the buyer has to ay to the seller the loss that the seller has sustained on reselling the goods on the date of beach of contract committed by the buyer. Whether the seller resells the goods or not, the measure of damages will be the difference in the market and contract prices on the day of breach.

This principle of the Law related to Sale of Goods Act applies even if the seller has actually suffered less loss. Where there is failure to accept an installment, the difference is to be taken on the due date of an installment. Where the difference is nil, the seller can get only nominal damages. Where the market price rises after the breach so that the seller makes a profit on resale, even so the court may allow him the difference. Where the goods do not have any ready market, the measure of damages will depend upon the facts of each case.

(B) REMEDIES AGAINST GOODS SOLD

Remedies against goods sold are available only to an unpaid seller under the Law related to Sale of Goods Act. Section 45 of the Sale of Goods Act defines unpaid seller as a seller to whom the whole of the price has not been paid or offered or to whom a cheque or some other negotiable instrument was given for the price and the same has been dishonoured.

Under Section 46 of the Act, the unpaid seller of goods has the following remedies against the goods contracted to be sold:
(a) Right of Lien.
(b) Right of Stoppage in Transit.
(c) Right of Resale.
(a) Right of Lien

Lien means retaining the goods. Possession is an essential element for the exercise of this right. Unless there is possession, there is no lien. The unpaid seller who is still in possession is entitled to retain the possession of the goods until payment or tender of the price in the following cases:
(a) Where the goods have been sold without any stipulation 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.

The seller may exercise his right of lien even when he is in possession of the goods as agent or bailee for the buyer.

Where an unpaid seller has made part delivery of the goods, be 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.

Termination of Lien

An unpaid seller loses his right of lien when he absolutely delivers the goods to a carrier or some other person for the purpose of transmission to the buyer and does not reserve any right, called the right of disposal, to take back the goods; or when the buyer or his agent has taken possession of the goods or when the seller has waived his right of lien. Waiver may be express or implied. An express waiver means the seller promising to deliver the goods without waiting for the price. Implied waiver means an agreement to sell goods on credit or delivery of the documents of title to the goods enabling the buyer to take delivery of the goods. The Law related to Sale of Goods Act thus provides and contemplates a different legal preposition.

(b) Right of Stoppage in Transit

The right of stoppage in transit means that where the seller has delivered the goods to a carrier or some other person for transmission toward the buyer, the seller may ask such person to bring back the goods to him. This right can be exercised only in the extreme case of the buyer’s insolvency. The right is subject to two important conditions. One, the buyer must have become insolvent and, second, the goods must be in transit. The right commences when transit commences and ends when transit ends.

The commencement and end of transit is governed by the principles stated in Section 51. They are as follow:


(1) Transit ends when the buyer or his agent has taken delivery of the goods from the carrier.
(2) Where the buyer or his agent takes possession of the goods before their arrival at the appointed destination.
(3) Where the carrier, on arrival at the appointed destination, acknowledge to the buyer that he is now holding goods on the buyer’s behalf.
(4) Where the buyer does not accept the goods on their arrival at the appointed destination, the transit does not end, even if ht goods have been unloaded.
(5) Where the goods have been delivered to a carrier chartered by the buyer it will be a question of fact in each case whether transit has ended. If the carrier has received the goods as the buyer’s agent, transit ends.
(6) Transit ends when, on arrival at the appointed destination, the carrier is wrongfully refusing to deliver the goods to the buyer.
(7) Where the goods have been delivered in part, the seller may stop the remainder unless, of course, part delivery shows an intention to deliver the whole.
Section 52 lays down the manner of exercising this power. The right is exercised by giving notice to the carrier to the effect that he should not carry further the goods and should return them to the seller.


The rights of lien and stoppage in transit are both defeated when the goods have been further sold by the buyer with the seller’s consent or documents of title to the goods, such as railway receipt or bill of lading, have been sent to the seller and he has sold or pledged the goods by transferring the documents.

(c) Right of Resale

An unpaid seller retains possession of the goods in the exercise of his right of lein or regains possession by stopping goods in transit. The contract of sale, however, remains binding. The buyer can claim possession by offering the price. But how long should the seller be compelled to wait? Section 54, therefore, gives the seller the remedy of reselling the goods.

In the first place, the goods may be resold without reference to the buyer if they are of perishable nature. In other cases, the seller should give a reasonable notice to the defaulting buyer of his intention to sell. The goods may then be resold. Shortfall, if any, in the price can be recovered from the defaulting buyer. A right of resale without notice can be expressly reserved in the contract. The buyer will become entitled to take back his deposit, if any, subject to his liability to damages for breach.

IMPORTANT:
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