Performance of contract of sale

commercial law

1. Post Graduate and Research Department of Commerce Commercial Laws Dr. S. CHANDRASEKARAN Assistant Professor of Commerce PG & Research Department of Commerce Vivekananda College Tiruvedakam West Madurai

2. Sale of Goods Act Performance of Contract of Sale

3. PERFORMANCE OF CONTRACT OF SALE Introduction After the formation of a valid contract of sale, the next stage is its performance, Contract of sale imposes some duties on the seller and the buyer, It also confers some rights to the seller and the buyer, The seller's main duty is to deliver the goods to the buyer, Similarly, the buyer's main duty is to accept the goods and pay the price to the seller as per the terms of the contract The term "performance of contract of sale" may be defined as the performance of the respective duties of the seller and the buyer as per the terms of the contract, The buyer and the seller are free to provide any terms they like in their contract about the time, place, delivery of goods, payment of the price etc., But when the parties are silent and do not provide any terms and conditions in the contract, then the rules contained in the Sale of Goods Act are applicable

4. Delivery of Goods According to Sec, 2(2), "delivery means voluntary transfer of possession from one person to another", Delivery is a bilateral act It requires two parties to act If transfer of possession of goods is not voluntary i.e., possession is obtained by theft etc., there is no delivery, The performance is mutual and is laid down in Sec, 31 of the Act states that, "It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale," The primary rule to be followed is that the payment of price and the delivery of goods are to be concurrent. Sec, 32 lays down that "Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods.

5. Mode of Delivery sec. 33 states that "Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf. Thus, delivery need not mean the transfer of physical possession of goods. The essence of delivery is placing the buyer in such a position as to enable him to exercise his rights of ownership over the goods. Therefore, the delivery of goods may be made in any of the following ways:

6. 1. Actual Delivery (Physical Delivery) Where the goods are actually handed over by the seller to the buyer or his duly authorized agent, it is called actual delivery. 2. Symbolic Delivery Where a bulk of goods is sold, it is not possible to give actual delivery of the goods. In such case the control over the goods is transferred by delivery of a symbol. 3. Constructive Delivery Sec. 36 (3) of the Act states that "Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf." Constructive delivery may be defined as the delivery when a third person, in possession of the goods, acknowledges to hold the goods on behalf of the buyers.

7. Rules Regarding Delivery of Goods (Sec. 33 to 39) 1. Possession of Goods (Sec. 33) 2. Delivery and Payment are concurrent Conditions(Sec. 32) 3. Demand for Delivery of Goods (Sec. 35) 4. Time of Delivery [Sec. 36(2)) 5. Place of Delivery [Sec. 36(1)) 6. Goods in the Possession of Third Person [Sec. 36 (3)) 7. Effect of Part Delivery (Sec. 34) 8. Expenses of Delivery [Sec. 36 (5)) 9. installment Delivery (Sec. 38) 10. Delivery of Wrong Quantity (Sec. 37) (a) Short Delivery (Sec. 37 (I) (b) Excess Delivery (Sec. 37 (2) (c) Mixed Delivery [Sec. 37 (3) 11. Delivery to a Carrier or Wharfinger (Sec. 39) 12.Delivery at a Distant Place (Sec. 40)

8. ACCEPTANCE OF DELIVERY 1 . Buyer's Right of Examining the Good (Sec. 41) Sec. 41 (I) states that, "Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract." 2. When Accepted? (Sec. 42) Sec. 42 lays down that "the buyer is deemed to have accepted the goods: (a) When he intimates to the seller that he has accepted them; or (b) When he receives delivery of goods, he does any act in relation to them which is inconsistent with the ownership of the seller; 3. Buyer not Bound to Return the Rejected Goods (Sec. 43) Sec. 43 states that "Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right to do so, he is not bound to return them to the seller, but it is Sufficient if he intimates to the seller that he refuses to accept them." The goods are then at the Seller's risk.

9. Buyer's Liability for neglecting or Refusing Delivery of Goods (Sec. 44) Sec. 44 lays down that, "When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not, within a reasonable time after such request, take delivery of the goods, he is liable to the seller for: (a) any loss occasioned by his neglect or refusal to take delivery, and (b) a reasonable charge for the care and custody of goods". Sec. 44 also provides that where the neglect or refusal of the buyer to take delivery amount to a repudiation of the contract. The seller may sue tor the price or damages.

10. RIGHTS AND DUTIES OF A BUYER Rights of a Buyer The following are the rights of the buyer:   1. Right to have Delivery of Goods (Sec. 32) The buyer has the right to take delivery of the goods on payment of price when delivery of goods and payment of price are concurrent conditions in the contract of sale.   2. Right to Reject the Goods (Sec. 37) The buyer is entitled to reject the goods in the following cases: (a) Where the seller delivers lesser quantity than that contracted for; (b) Where the seller delivers larger quantity than that contracted for; (c) Where the seller mixes the contracted goods with goods of a different description.   3. Right not to Accept Installments (Sec. 38) Subject to contract, the buyer is under no obligation to accept delivery of the goods by instalments. He can repudiate the contract in such circumstance. [Sec. 38 (I)  

11. 4. Right to Examine the Goods (Sec. 41) The buyer is not deemed to have accepted the goods unless and until: ( i ) he has reasonable opportunity to examine the goods; (ii) he is afforded a reasonable opportunity of examining the goods to see whether the goods are in conformity with the contract. 5. Right not to Return the Rejected Goods (Sec: 43) Subject to agreement, the buyer is not liable to return the goods rejected by him rightfully. It is sufficient if he intimates the seller that he refused to accept the goods. 6. Right to the Notice of Insurance [Sec. 39 (3)] It is the duty of the seller to give notice to the buyer to enable him to insure the goods during the sea transit. If he fails to do so, the buyer is not liable for destruction of goods in transit.

12. Right against the Seller for Breach of Contract 7. Suit the Seller for non-delivery (Sec. 57) Sec. 57 lays down that, "Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery."   8. Suit for Specific Performance (Sec. 58) The buyer may sue the seller for specific performance of the contract of sale. If the goods are specific or ascertained, the court may order for the specific performance of the contract.   9. Suit for Breach of Warranty (Sec. 59) Section 59 lays down that, "Where there is a breach of warranty, by the seller, or where the buyer elects or is compelled to treat the breach of condition by the seller as a breach of warranty, the buyer may: (a) set up against the seller the breach of warranty in diminution or extinction of the price; or (b) sue the seller for damages for the breach of warranty."

13. 10. Repudiation of the Contract before due Date (Sec. 60) In such a case the buyer has the right for anticipatory breach of contract. Sec. 60 states that where the seller repudiates the contract before the date of delivery, the buyer may either treat the contract as subsisting and wait till the date of delivery or treat the contract as rescinded and sue for damages for breach of contract.   11.Suitforinterest [Sec. 61 (2) (b)] Where there is a breach of contract on the part of the seller and as a result the price is to be refunded to the buyer, the buyer has a right to claim interest on the amount of price.

14. DUTIES OF THE BUYER The buyer, in respect to the contract of sale, has to perform the following duties: 1. Duty to Pay Price and Accept tile goods (Sec. 31) It is the duty of the buyer to take the delivery of the goods and pay for them in accordance with the terms of the contract.   2. Duty to Apply for delivery (Sec. 35) The seller is not bound to deliver the goods to the buyer until the buyer applies for delivery, in the absence of any contract to the contrary.   3. Duty to Demand Delivery at a Reasonable Hour [Sec. 36 (4)] As per Sec. 36 (4), "Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact.

15.   4. Duty to Accept Instalment Delivery and Pay for It [Sec. 38 (2)] Where there is a contract for the-sale of goods to be delivered by stated instalments which are to be separately paid for, it is the duty of the buyer to accept the instalment delivery and pay for it. 5. Duty against Deterioration (Sec. 40) Unless otherwise agreed, the buyer has to take the risk of deterioration of the goods incidental to the course of transit.   6. Duty to Intimate the Seller when Reject the Goods (Sec. 43) Unless otherwise agreed, it is the duty of the buyer to inform the seller in case he refuses to accept the goods.   7. Duty to Take delivery (Sec. 44) It is the duty of the buyer to take delivery of the goods within a reasonable time after the tender of delivery. He becomes liable to the seller for any loss occasioned by his neglect or refusal to take delivery.

16. 8. Duty to Pay Price (Sec. 55) Sec. 55 (1) lays down that "Where under a contract of sale the property in the goods has Passed to the buyer and the buyer wrongfully neglects or refuses to pay the goods according to the terms of the contract, the seller may sue him for the price of the goods."   9. Duty to Pay Damages for Non-acceptance (Sec. 56) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance.   10. Duty to Pay Increased Tax (Sec. 64 A) The buyer is liable to pay so much as will be equivalent to the amount paid or payable in respect of such tax imposed or increase of tax which may be chargeable at the time of sale, in the absence of any contract to contrary.

17. RIGHTS AND DUTIES OF A SELLER Rights of a Seller The rights of seller may be discussed as under: 1. Right to Claim Compensation (Sec. 44) . It is the right of the seller to claim compensation for the loss occasioned by the buyer’s neglect or refusal to take delivery and also reasonable charges for the care and custody of the goods. 2. Right to Sue far Price [Sec. 55 (1)] Sec. 55 (1) lays down that "Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods."

18. 3. Right to Sue for Price against Contract [Sec. 55 (2)] Sec. 55 (2) lays down that, "Where under a contract of sale the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract." 4. Right to Sue for Damages (sec. 56) Sec. 56 lays down that, “Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance.” 5. Right to Treat the Contract as Subsisting (Sec. 60) Sec. 60 states, "Where the buyer repudiates the contract before the date of delivery of goods, seller may either treat the 'contract as subsisting and wait till the date of delivery, or he may treat the contract as repudiated and sue for damages for the breach."

19. 6. Right to Interest by Way of Damages [Sec. 61 (1)] It is the right of the seller to recover interest or special damages in any case where by law interest or special damages may be recoverable. 7. Rights of an Unpaid Seller (a) Right against the goods (b) Right against the buyer personally

20. Duties of a Seller The duties and liabilities of the seller may be discussed as follows: 1. Duty to Deliver the Goods (Sec. 31) It is the duty of the seller to deliver the buyer goods in accordance with the terms of the contract. 2. Duty to Deliver tire Goods at the Agreed Place [Sec. 36 (1)] It is the duty of the seller to send the goods to the buyer at the place at which they arc contracted to be delivered. 3. Duty to Supply the Goods within Specified tittle [Sec. 36 (2)] It is the duty of the seller to send the goods to the buyer within the fixed time or within reasonable time when no time for sending the goods is fixed.

21. 4. Duty to Send the Goods at Reasonable Hour (Sec. 36 (4)] Tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is reasonable hour is a question of fact. 5. Duty to Bear the Expenses of putting the Goods in Deliverable State [Sec. 36 (5)] It is the liability of the seller to bear the expenses of and incidental to putting the goods into a deliverable state. 6. Duty to make Contract with Carrier and Wharfinger [Sec. 39 (2)) It is the duty of the seller to make such contract with the carrier or wharfinger on behalf of the buyer as may be reasonable, having regard to the nature of the goods. If he fails to do so he is liable to bear loss if any, incurred in course of transit of the goods.

22. 7. Duty to Give Notice to the Buyer [Sec. 39 (3)) Subject to the agreement, it is the duty of the seller to give notice to the buyer to get the goods insured while the goods are sent by a route involving sea transit. If he fails to do so, goods shall be deemed to be at seller's risk during such sea transit. 8. Duty to Give Reasonable Opportunity to Examine the Goods (Sec. 41) ' It is the duty of the seller to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.