Goods and Types of Goods

Brief information about what is goods, warrenties and condition of goods. and right of disposal of goods by bailee and bailer

1. Goods and its types Warranties and conditions Right Of Disposal Of Goods Presentation on Presented By: Arun Kumar MBA

2. As per Section 2 (7) of the ‘Act’ as. ‘Goods’ is defined “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. Definition Of Goods

3. Existing Goods Contd… Existing goods mean the goods which are either owned or possessed by the seller at the time of contract of sale. Example- A sells 5 bags of Sugar to B, which is laying down in the Godown... The Sugar Bags are called "existing goods. Specific Goods Unsanctioned Goods The existing goods may be specific or ascertained and unascertained or unsanctioned as follows: These are the goods which are identified and agreed upon at the time when a contract of sale is made- For example, specified TV, VCR, Car, Ring. These are the goods which are not identified and agreed upon at the time when a contract of sale is made e.g. goods in stock or lying in lots.

4. Contd… Future Goods Contingent Goods Future goods mean goods to be manufactured or produced or acquired by the seller after the making of the contract of sale. There can be an agreement to sell only. There can be no sale in respect of future goods because one cannot sell what he does not possess. For example: a farmer may agree to sell a buyer all of the milk produced by his/her cows in the coming year. This is called an "agreement to sell." These are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen. For example: If the seller promises to the buyer that he will sell him the goods on a certain date if he receives the goods from the manufacturer before that date

5. M/S JCL International Ltd. BHARAT PETROLEUM CORPORATION Ltd. Case Study V/s

6. About PETITIONER & RESPONDENT Petitioner: M/s JCL International Ltd. JCL provides solutions for supply & distribution of LPG as domestic, industrial and automotive fuel. They carry out LPG bottling for Shell, Bharat Petroleum and Hindustan Petroleum Corporation. Respondent: Bharat Petroleum Corporation Ltd. Bharat Petroleum Corporation Limited is one of the largest public sector, oil marketing company in India. JCL’s Claim- To consider Provisional price as Final price

7. Section 9 of the 1930 Act allows the parties not to fix the price at the time of the transfer and to leave the determination of the amount of consideration to a later date. Also re – fixing or revising of price was done with due notice and in breach of terms and conditions of the contract and statutory provisions. Thus, considering the provisions of Sales of goods act and the contract Act, the fixing of Provisional price cannot be stated to be impermissible and creates no right in favour of JCL’s Claims. The Judgement

8. Conditions and Warranties It is usual for both seller and buyer to make representations to each other at the time of entering into a contract of sale. Some of these representations are mere opinions which do not form a part of contract of sale. Whereas some of them may become a part of contract of sale. Representations which become a part of contract of sale are termed as stipulations which may rank as condition and warranty e.g. a mere commendation of his goods by the seller doesn’t become a stipulation and gives no right of action to the buyer against the seller as such representations are mere opinion on the part of the seller. But where the seller assumes to assert a fact of which the buyer is ignorant, it will amount to a stipulation forming an essential part of the contract of sale.

9. Meaning Of Conditions According to Section 12(2) , “ A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.”

10. Meaning Of Warranty According to Section 12(3) of sales of good act, ”A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated”.

11. Conditions to be treated as Warranty In the following three cases a breach of a condition is treated as a breach of a warranty: Where the buyer waives a condition; once the buyer waives a condition, he cannot insist on its fulfilment e.g. accepting defective goods or beyond the stipulated time amount to waiving a condition. Where the buyer elects to treat breach of the condition as a breach of warranty. where he claims damages instead of repudiating the contract. c) Where the contract is not severable and the buyer has accepted the goods or part thereof, the breach of any condition by the seller can only be treated as breach of warranty. It cannot be treated as a ground for rejecting the goods unless otherwise specified in the contract. Thus, where the buyer after purchasing the goods finds that some condition is not fulfilled, he cannot reject the goods. He has to retain the goods entitling him to claim damages.

12. Types Of Warranties and Conditions Express Defined as promises expressed in a specific statement concerning the quality of the product. Can be written or oral. Example: A warranty card in the box that states exactly what the company will do if the product does not work properly Implied Defined as an unwritten , unstated warranty understood by the consumer and the seller that a product will perform as expected. Example: when you purchase a car with a stereo it will play music.

13. Types of Implied Conditions 1. Conditions as to title There is an implied condition on the part of the seller that. In the case of a sale, he has a right to sell the goods, and 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. 2. Condition in case of sale by description and sample If the sale is by sample as well as by description, the goods must correspond with the sample as well as the description.

14. 3. Condition in case of sale by description Where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with description. The main idea is that the goods supplied must be same as were described by the seller. Sale of goods by description include many situations as under: Where the buyer has never seen the goods and buys them only on the basis of description given by the seller. Where the buyer has seen the goods but he buys them only on the basis of description given by the seller. Where the method pf packing has been described. Contd…

15. Types of Implied Conditions 4. Condition in case of sale by sample: A contract of sale is a contract for sale by sample when there is a term in the contract, express or implied, to that effect. Such sale by sample is subject to the following three conditions: The goods must correspond with the sample in quality. The buyer must have a reasonable opportunity of comparing the bulk with the sample. The goods must be free from any defect which renders them unmerchantable and which would not be apparent on reasonable examination of the sample. Such defects are called latent defects and are discovered when the goods are put to use.

16. 5. Condition as to quality or fitness There is no implied condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. In other words, the buyer must satisfy himself about the quality as well as the suitability of the goods. Expectations: The particular for which goods are required must have been disclosed (expressly or impliedly) by the buyer to the seller. The buyer must have relied upon the seller’s skill or judgement. The seller’s business must be to sell such goods. Contd…

17. 6. Condition as to merchantable quality Where the goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality. The expression ‘merchantable quality’ means that the quality and condition of the goods must be such that a man of ordinary prudence would accept them as the goods of that description. Goods must be free from any latent or hidden defects. Contd…

18. 7. Condition as to wholesomeness In case of eatables or provisions or foodstuffs, there is an implied condition as to wholesomeness. Condition as to wholesomeness means that the goods shall be fit for human consumption. 8. Conditions implied by custom Condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. Contd…

19. Implied warranties Warranty as to quiet possession There is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. The reach of this warranty gives buyer a right to claim damages from the seller.   Warranty of freedom from encumbrances There is an implied warranty that the goods are free from any charge or encumbrance in favour of any third person if the buyer is not aware of such charge or encumbrance. The breach of this warranty gives buyer a right to claim damages from the seller.   Warranty as to quality or fitness for a particular purpose annexed by usage of trade Warranty to disclose dangerous nature of goods. In case of goods of dangerous nature, the seller fails to do so, the buyer may make him liable for breach of implied warranty.

20. Case Breach of Conditions  (Wills v Amber [1954]) Lloyd’s Rep 253, a four-berth motor boat had been sold. An innocent statement by the seller that the hull was sound was held to be a warranty, which the buyer had entered into the contract in reliance upon it, when in fact the hull was rotten….. The Buyer is facing damages and the seller is try to avoid it.. …………

21. Case Breach of Conditions  (Wills v Amber [1954]) The Seller has to pay the damages to the buyer and also has to pay money as compensation for repairing of the boat hull…. ……

22. Right of Disposal Of Goods: As a rule, the property in the goods can be transferred from the seller to the buyer, if the goods are either specific or ascertained. In addition, for passing the property to the buyer from seller, the seller should not have reserved his right of disposal of the goods till the fulfilment of certain conditions. Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange; and, if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him

23. Bailment The word “bailment” has been derived from the French word “ballier” which means “to deliver”. In general, Bailment means the delivery of goods of a person to whom permission is given to have the goods of another person. According to Section 148 of the Contract Act, “Bailment means the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them”.

24. Bailment Please Stich a Shirt for Me….. OKAY.. Come after 7 days Example : Sanju delivers a piece of cloth to Manju, a tailor, to be stitched into a suit. There is a contract of bailment between Sanju and Manju.

25. What Is a Bailee? A bailee is an individual who temporarily gains possession, but not ownership, of a good or other property. The bailee, who is also called a custodian, is entrusted with the possession of the good or property by another individual known as the bailor. This relationship, referred to in legal terms as a bailment, is based on a contractual agreement between the bailor and the bailee. The bailment specifies the terms and purpose of the change in custody and is outlined in writing such as a receipt or chit.

26. Duties of a Bailee: Reasonable care of the goods (Section 151): The Bailee is supposed to take care of the goods as they were to be his own. He must take reasonable care of the goods as an ordinary and prudent man of sound mind. Example: A delivers his car to B for servicing after bumping it in a tree. B cannot bump the car in a tree because A did the same. He ought to take care of the car. Unauthorized Use of Goods (Section 154) If there be any unauthorized usage of the bailed good and there be any damage arising out of the unauthorized usage then the Bailee is liable to compensate the Bailor for the same. Example: A lends his car to B for driving. B gives it to his son C for joy riding. C crashes the car. B is liable to compensate A for the damage as A had bailed the car to B, and not C.

27. Duty of not Mixing the Goods (Section 155, 156) The Bailee has the responsibility keep his own goods and the Bailor’s good separate. He should not mix the two without any prior permission of the Bailor. But if any act of ignorance regarding the separation be done and the result of which be the in-separation of the Bailor’s good, then the Bailee must compensate the Bailor for the loss incurred. Example: A gives B a sack of Basmati rice. B mixes it with general rice. B is liable to compensate A for his loss as the cost of Basmati rice is more than the cost of normal rice. Return the Goods (Section 161) The Bailee must return or deliver the good upon the fulfilment of the purpose. If the Bailee retains the goods even after the lapse of the slated time period then the Bailee is liable for any damages done. Example: A gives his documents to B for safe-keeping for a month. A does not take it back even after 3 months and neither does B return it to A. The documents are burnt in a fire. B is responsible for the loss as it was his duty too. Contd…

28. Dispute as to ‘Who is the owner?’ (Section 117) If the Bailee has received the good from the Bailor then he must return the good to the Bailor only. It does not matter if there a third person who claims the good to be his. The Bailee has accepted the good to be Bailor’s during bailment. The Bailee has no right to not re-deliver the good to the Bailor on grounds that the Bailor is not the real owner. Example: A gives his car to B. C comes to B and claims the car to be his. But B is responsible towards A, and an only as for this particular bailment A is the Bailor and not C. Contd…

29. Who is a bailer? A bailor is an individual who temporarily relinquishes possession but not ownership of a good or other property under a bailment. The bailor entrusts the possession of the good or property to another individual, known as the bailee. A bailment is usually a contractual agreement between the bailor and the bailee that specifies the terms and purpose of the change in possession.

30. Duties of Bailor 1) Disclosure of known faults (Section 150): Bailor is supposed to disclose the known faults in the goods bailed to the bailee and if he fails to do so, he will be held liable for the damage caused to the bailee due to such faults. If the bailor bails goods for hire, he will be liable for even the faults which he isn’t aware of. However, in a bailment for consideration, he can be held responsible only for the faults which he is aware of and failed to disclose them. 2) Bear unordinary expenses of bailment (Section 158): The bailor has to bear any unordinary expenses incurred under contract of bailment. In case of bailment for consideration, when the goods are required to be carried or kept or some work is done in relation to them by the bailee, the bailor is required to repay all the expenses incurred by the bailee to him.

31. 3) Indemnification of bailee for incurring loss when bailment is terminated prior to its term (Section 159): A bailment for consideration can be terminated at any time by the bailor even when the bailment was for a specific purpose or time. Any loss accrued to the bailee from such termination shall not more than the benefit derived from the bailment. In case the loss is more than the benefit, the bailee shall be indemnified by the bailor.  4 ) Receive back the goods : The bailor shall receive the goods back when the bailee returns them after the expiry of term or fulfilment of purpose of bailment. If the bailor denies the receipt of goods, the bailee shall receive compensation from bailor for the expenses incurred due to custody of such goods. 5) Indemnification of the bailee (Section 164) : If the bailor’s title to the goods is defective and he is not entitled to make bailment and the bailee suffers any loss or damage as a consequence, the bailor will be liable for such loss or damage. Contd…

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