Lawrights of an Unpaid Seller Condtion and Warren Ties 2408

8/2/2019 Lawrights of an Unpaid Seller Condtion and Warren Ties 2408

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ASIA PACIFIC INSTITUTE OF MANAGEMENTSTUDIES

Conditions and Warranties&Rights of an Unpaid Seller

By SECTION-HGROUP-4

Debojit-66Abhisek-03Niraj-30Sritanu-57Krishnakant-25Biswajit-12


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CONTENTS:

Conditions and Warranties.

Express and Implied conditions andwarranties

Understanding the meaning of an Unpaid seller

Unpaid sellers Rights Against the Goods

Unpaid sellers Rights Against buyer personally

Remedies for breach of contract of sale


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CONDITION AND WARRANTIES

A stipulation in a contract of sale with reference to goods which arethe subject thereof may be a condition or a warranty[Sec. 12 (1)].Condition: [Sec. 12 (2)]. A condition is a stipulation which isessential to the main purpose of contract. It goes to the root of thecontract. Its non-fulfilment upsets the very basis of the contract.Example: By a charter party (a contract by which a ship is hired forthe carriage of goods ), it is agreed that ship M now in the port ofAmsterdam should proceed direct to Newport to load a cargo. In factat the time of the contract the ship is not in the port of Amsterdamand when the ship reached Newport, the charterer refused to load.

Held, the word now at the port of Amsterdam amounted to acondition, the breach of which entitled the charterer to repudiate thecontract.Warranty: [Sec. 12 (3)]. A warranty is a stipulation which iscollateral to the main purpose of the contract. It is not of such vitalimportance as a contract.

A stipulation may be a condition thoughcalled a warranty in a contract[Sec.12(4)].

DISTINCTION BETWEEN A CONDITION AND AWARRANTY

1. Difference as to value: A condition is a stipulation which is

essential to the main purpose of the contract. A warranty is a

stipulation which is collateral to the main purpose.

2. Difference as to breach: If there is a breach of condition , he

aggrieved party can repudiate the contract of sale ; in case of a

breach of warranty, the aggrieved party can claim damages only.

3. Difference as to treatment: A breach of condition may be treatedas a breach of a warranty. This would happen where the aggrieved

party is contented with damages only. A breach of a warranty,

however, cannot be treated as a breach of a condition.

WHEN CONDITION TO BE TREATED AS

WARRANTY [Sec. 13]

1. Voluntary waiver of condition: Where a contract of sale is

subject to any condition to be fulfilled by the seller, the buyer may


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(a) waive the condition, or (b) elect to treat the breach of the

condition as a breach of the warranty [Sec 13 (1)]. If the buyer

once decides to waive the condition, he cannot afterwards insist on

its fulfilment.

2. Acceptance of goods by buyer: Where a contract of sale is not

severable and the buyer has accepted the goods or part thereof,

the breach of any condition to be fulfilled by the seller can only be

treated as breach of warranty, unless there is a term of contract,

express or implied, to the contrary [Sec 13 (2)].

The provision of Sec.13 do

not affect the cases where the fulfilment of any condition, or

warranty is excused by the law by reason of impossibility or

otherwise [Sec.13 (3)].

EXPRESS AND IMPLIED CONDITIONS ANDWARRANTIES

In a contract of sale of goods conditions and warranties may beexpress or implied. Express and warranties ( contained in Secs. 14 to17) are those which the law implies into the contract unless theparties stipulate to the contrary.

IMPLIED CONDITIONS

1. Condition as to title: [Sec. 14(a)]. In a contract of sale,

unless the circumstances of the contract are such as to show a

different intention, there is an implied condition on the part of

the seller that

a) In the case of a sale, he has a right to sale the goods, and

b) 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. Sale by description: [ Sec. 15] Where there is a contract for

the sale of the goods by description, there is an implied

condition that the shall correspond with the description.


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Example: A ship was contracted to be sold as a copper-fastenedvessel to be taken with all faults, without any allowance for anydefect whatsoever. The ship turned out to be partially copper-fastened. Held, the buyer was entitled to reject.

3. Condition as to quality or fitness: [ Sec. 16 (1)] Normally,

in a contract of sale there is no implied condition as to quality

or fitness of the goods for a particular purpose. The buyer must

examine the goods thoroughly before he buys them in order to

satisfy himself.

Example: An order was placed for some lorries to be used forheavy traffic in a hilly area. The lorries supplied were unfit andbreakdown. There is a breach of condition as to fitness.

4. Condition as to merchantability: [ Sec. 16 (2)]. This means

goods should be such as are commercially saleable under the

description by which they are known in the market at their full

value.

Example: A firm of Liverpool merchants contracted to buy from aLondon merchant a number of bales of Manilla hemp to arrivefrom Singapore. The hemp was damaged by sea water in such away that it would not pass in the market as Manilla hemp. Held,

the goods were not of merchantable quality.

5. Condition implied by custom: [ Sec. 16 (3)]. An implied

condition as to quality or fitness for a particular purpose may

be annexed by the usage of trade.

6. Sale by sample (Sec 17): [Sec. 17 (1)] An implied condition

in which the bulk shall correspond with the sample in quality

and shall have a reasonable opportunity of comparing the bulk

with the sample.

By condition, [Sec. 17 (2)] The goods shall befree from any defect, rendering the unmerchantable. Thedefect should not however be apparent on a reasonableexamination of the sample.

Example: In a contract of sale of brandy by sample, brandycoloured with a dye was supplied. Held, the buyer was not bound tothe contact even though the goods supplied are even to the samples,as the defects were not apparent on reasonable examination of the

sample.


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7. Condition as to wholesomeness: In the case of eatables and

provisions, in addition to the implied condition as to

merchantability, there is another implied condition that the

good shall be wholesome.

Example: A bought a bun containing a stone which broke one ofAs teeth. Held, he could recover damages.

IMPLIED WARRANTIES

1. Warranty of quiet possession: [Sec. 14(b)]. In a contract of

sale, unless there is a contrary intention, there is an implied

warranty that the buyer shall have and enjoy quiet possessionof the goods. If the buyer is in any way disturbed in the

enjoyment of the goods in consequence of sellers defective

title to sell, he can claim damages from the seller.

2. Warranty of freedom from encumbrances: [Sec. 14 (c).

The goods are not subject to any change or right in favour of a

third party.

3. Warranty as to quality or fitness by usage of trade: [Sec.

16 (4)]. An implied warranty as to quality or fitness for a

particular purpose may be annexed by the usage of trade.

4. Warranty to disclose dangerous nature of goods: Where a

person sell goods, knowing that the goods are inherently

dangerous or they are likely to be dangerous to the buyer and

that the buyer is ignorant of the danger, he must warn the

buyer of the probable danger, otherwise he will be liable in

damages.

Exclusion of implied conditions and warranties: Impliedconditions and warranties in a contract of sale may be negative orvaried by (a) express agreement between the parties; or (b) thecourse of dealing between them; or (c) the custom or usage oftrade.

CAVEAT EMPTOR

This means let the buyer beware, i.e., in a contract of sale of

goods the seller is under no duty to reveal unflattering truthsabout the goods sold.


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MEANING OF UNPAID SELLER

U/SEC. 45

"Unpaid seller" defined as

(1) The seller of goods is deemed to be an "unpaid seller"within themeaning of this Act.-

(a) Who has not been paid or tendered the whole of the priceof thegoods sold, or

(b) Who had received a bill of exchange or other negotiableinstrument has as a conditional payment, and the condition onwhich it was received has not been fulfilled by reason of thedishonour of the instrument or otherwise.

(2) In this Chapter, the term "seller"includes any person who is inthe position of a seller, as, for instance, an agent of the seller towhom the bill of lading has been endorsed, or a consignor or agentwho has himself paid, or is directly responsible for, the price.

Example: A purchased some goods in his personal name onbehalf of his principal B. B refuses to pay the price of the goods.Since A has incurred personal liability, the relationship between him

and his principal will be taken as that of a seller and a buyer. A willbe taken as unpaid seller under the provision of Sec. 45.

The unpaid seller has two types of rights under the Sale ofGoods act. This includes the sellers right against the goodsand the sellers right against the buyer personally.


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Unpaid Sellers Rights Against The GoodsU/Sec. 46

Unpaid seller's rights

Subject to the provisions of this Act and of any law for the time beingin force, notwithstanding that the property in the goods may havepassed to the buyer, the unpaid seller of goods, as such, has byimplication of law-a lien on the goods for the price while he is in possession of them;in case of the insolvency of the buyer a right of stopping the goods in

transit after he has parted with the possession of them;a right of re-sale as limited by this Act.Where the property in goods has not passed to the buyer, the unpaidseller has, in addition to his other remedies, a right of withholdingdelivery similar to and co-extensive with his rights of lien andstoppage in transit where the property has passed to the buyer.

(I) when the property in the goods has beentransferred:

i) Right of Lienii) Right of stoppage of goods in transitiii) Right of resale

i) Right of lien [Sec. 46(1) (a) and 47 to 49]

A lien is a right to retain possession of goods until payment of the

price.

Rules regarding lienSubject to the provisions of this Act, the unpaid seller of goods whois in possession of them is entitled to retain possession of them untilpayment or tender of the price in the following cases, namely:-

a) where the goods have been sold without any stipulation as tocredit;

b) where the goods have been sold on credit, but the term of credithas expired;


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c) where the buyer becomes insolvent.

The seller may exercise his right of lien notwithstanding that he is inpossession of the goods as agent or bailee for the buyer.

Where an unpaid seller has made part delivery of the goods, hemay exercise his right of lien on the remainder, unless such partdelivery has been made under such circumstances as to show anagreement to waive the lien.

Termination of lienThe unpaid seller of goods loses his lien thereon-

a) when he delivers the goods to a carrier or other bailee for thepurpose of transmission to the buyer without reserving the right ofdisposal of the goods;b) when the buyer or his agent lawfully obtains possession of thegoods;by waiver thereof.c) when the seller expressly or implied waives his rights of lien.

The unpaid seller of goods, having a lien thereon, does not lose

his lien by reason only that he has obtained a decree for the price ofthe goods.

ii) Right of stoppage in transit [Sec. 50 to 52]

Subject to the provisions of this Act, when the buyer of goodsbecomes insolvent, the unpaid seller who has parted with the

possession of the goods has the right of stopping them in transit,that is to say, he may resume possession of the goods as long asthey are in the course of transit, and may retain them until paymentor tender of the price. An unpaid seller can exercise right of stoppageof goods in transit when each of the following conditions aresatisfied:

i) Seller had parted with the possession of the goods.ii) Goods are in the course of transmission to the buyer.iii) The buyer of the goods has become insolvent.


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Duration of transitGoods are deemed to be in course of transit from the time whenthey are delivered to a carrier or other bailee for the purpose oftransmission to the buyer, until the buyer or his agent in that behalf

takes delivery of them from such carrier or other bailee. Followingare the cases where transit is presumed to be an end the sellersright of stopping the goods in transit terminates:

i) If the buyer or his agent in that behalf obtains delivery of thegoods before their arrival at the appointed destination, the transit isat an end.ii) If, after the arrival of the goods at the appointed destination, thecarrier or other bailee acknowledges to the buyer or his agent that heholds the goods on his behalf and continues in possession of them as

bailee for the buyer or his agent, the transit is at an end and it isimmaterial that a further destination for the goods may have beenindicated by the buyer.

iii) If the goods are rejected by the buyer and the carrier or otherbailee continues in possession of them, the transit is not deemed tobe at an end, even if the seller has refused to receive them back.

iv) Where the carrier or other bailee wrongfully refuses to deliver thegoods to the buyer or his agent in that behalf, the transit is deemed

to be at an end.

v) Where part delivery of the goods has been made to the buyer orhis agent in that behalf, the remainder of the goods may be stoppedin transit, unless such part delivery has been given in suchcircumstances as to show an agreement to give up possession of thewhole of the goods.

How stoppage in transit is effectedThere are two modes of effecting stoppages of the delivery of thegoods to the buyer which are in the course of transmission:

a) by the seller taking actual possession of the goods, orb) by the seller giving notice of his claim to the carrier or other

bailee who has the actual possession over the goods.

Where the goods are in the actual possession of a person (servant or

agent) other than the principal carrier, notice to be effective must begiven at such time and under such circumstances that the principal or


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the employer, by the exercise of reasonable diligence maycommunicate it to his servant or agent in time to prevent thedelivery of the goods to the buyer.

Effect of sub-sale or pledge by buyer [sec. 53](1) Subject to the provisions of this Act, the unpaid seller's right oflien or stoppage in transit is not affected by any sale or otherdisposition of the goods which the buyer may have made, unless theseller has assented thereto:Provided that where a document of title to goods has been issued orlawfully transferred to any person as buyer or owner of the goods,and that person transfers the documents to a person who takes the

documents in good faith and for consideration, then, if such lastmentioned transfer was by way of sale, the unpaid seller's right oflien or stoppage in transit is defeated, and if such last mentionedtransfer was by way of pledge or other disposition for value, theunpaid seller's right of lien or stoppage in transit can only beexercised subject to the rights of the transferee.

(2) Where the transfer is by way of pledge, the unpaid seller mayrequire the pledge to have the amount secured by the pledgesatisfied in the first instance, as far as possible, out of any other

goods or securities of the buyer in the hands of the pledgee andavailable against the buyer.

iii) Right of resale [Sec. 54]

A unpaid seller who has the possession of goods can resell them

under the following circumstances:

(a) when the goods are of perishable in nature: goods areperishable in nature though has not been defined in the Act, but itmeans perishable not only physically but also commercially.

(b) when he gives notice of his intension to resell: the unpaidmay gives noyice to the buyer of his intension to re-sell the goodsand the buyer does not within a reasonable time pay or tender theprice.


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(c) when he expressly reserves the right of resale: where theseller expressly reserves right of resale in case the buyer shouldmake default, the seller may resell the goods in the event of such adefault.

(II) When the property in the goods has not beentransferred:

Right of withholding delivery: if the property in the goodshas not passed to the buyer, the unpaid seller cannot exercise rightof lien, but gets a right of withholding the delivery of goods, similarto and co-extensive with lien.


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Unpaid sellers Rights Against buyerpersonally

These are the rights which an unpaid seller may enforce against thebuyer personally. These rights of the seller against the buyer arecalled rights inpersonam and are in addition to his rights against thegoods. The rights inpersonam are as follows:

1) Suit for price: (sec. 55).(a) where property has passed:where under a contract of sale the property in the goods has passedto the buyer and the buyer wrongfully neglects or refuses to pay forthe goods, the seller may sue him for the price of the goods [Sec. 55

(1)].

(b) where property has not been passed : where under acontract of sale the price is payable on a certain day irrespective ofdelivery and the buyer wrongfully neglects or refuses to pay suchprice, the seller may sue him for the price. It makes no differenceeven if the property in the goods has not passed and the goods havenot been appropriated to the contract [Sec. 55 (2)].

2) Suit for damages for non-acceptance (Sec. 56).Where the buyer wrongfully neglects or refuses to pay for the goods,the seller may sue him for the price of the goods.

3) Repudiation of contract before due date (Sec. 60)where the buyer repudiates the contract before the date of delivery,the seller may either treat the contract as subsisting and wait till thedate of delivery or he may treat the contract as rescinded and sue fordamages for the breach. This rule is known as the rule of

anticipatory breach of contract.

4) Suit for interest[Sec. 61 (2) (a)]. Where there is aspecific agreement between the seller and the buyer as to interest onthe price of the goods from the date on which payment, becomesdue, the seller may charge interest on the price when it becomes duefrom such day as he may notify to the buyer.


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Remedies for breach of contract of sale

Following rights have given to the aggrieved partyby the Sale of goodsAct, in addition to the rights to an unpaid seller as discussed above:

1) Suit for price: Where under a contract of sale the property inthe goods has passed to the buyer and the buyer wrongfully neglectsor refuses to pay for the goods according to the terms of the

contract, the seller may sue him for the price of the goods.Where under a contract of sale the price is payable on a day certainirrespective of delivery and the buyer wrongfully neglects or refusesto pay such price, the seller may sue him for the price although theproperty in the goods has not passed and the goods have not beenappropriated to the contract.

2) Damages for non-acceptance: Where the buyerwrongfully neglects or refuses to accept and pay for the goods, the

seller may sue him for damages for non-acceptance.

3) Damages for non-delivery: Where the seller wrongfullyneglects or refuses to deliver the goods to the buyer, the buyer maysue the seller for damages for non-delivery.

4) Specific performance: Subject to the provisions of ChapterII of the Specific Relief Act, 1877, in any suit for breach of contract to

deliver specific or ascertained goods, the court may, if it thinks fit, onthe application of the plaintiff, by its decree direct that the contractshall be performed specifically, without giving the defendant theoption of retaining the goods on payment of damages. The decreemay be unconditional, or upon such terms and conditions as todamages, payment of the price or otherwise, as the court may deemjust, and the application of the plaintiff may be made at any timebefore the decree.


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5) Remedy for breach of warranty: Where there is abreach of warranty by the seller, or where the buyer elects or is

compelled to treat any breach of a condition on the part of the selleras a breach of warranty, the buyer is not by reason only of suchbreach of warranty entitled to reject the goods; but he may-set up against the seller the breach of warranty in diminution orextinction of the price, orsue the seller for damages for breach of warranty.

The fact that a buyer has set up a breach of warranty indiminution or extinction of the price does not prevent him from suingfor the same breach of warranty if he has suffered further damage

Repudiation of contract before due dateWhere either party to a contract of sale repudiates the contractbefore the date of delivery, the other may both treat the contract assubsisting and wait till the date of delivery, or he may treat thecontract as rescinded and sue for damages for the breach.

6) Interest by way of damages and specialdamages: Nothing in this Act shall affect the right of the seller orthe buyer to recover interest or special damages in any case wherebylaw interest or special damages may be recoverable, or to recoverthe money paid where the consideration for the payment of it hasfailed.In the absence of a contract to the contrary, the court may awardinterest at such rate as it thinks fit on the amount of the price-to the seller in a suit by him for the amount of the price-from thedate of the tender of the goods or from the date on which the price

was payable;to the buyer in a suit by him for the refund of the price in a case of abreach of the contract on the part of the seller-from the date onwhich the payment was made.

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Lawrights of an Unpaid Seller Condtion and Warren Ties 2408