Case Study on Application of The Sale of Goods Act 1930

INTRODUCTION

The Sale of Goods Act, 1930 governs the contracts relating to sale of goods. It applies to the whole of India except the State of Jammu & Kashmir. The contacts for sale of goods are subject to the general principles of the law relating to contracts i.e. the Indian Contact Act. A contract for sale of goods has, however, certain peculiar features such as, transfer of ownership of the goods, delivery of goods rights and duties of the buyer and seller, remedies for breach of contract, conditions and warranties implied under a contract for sale of goods, etc. These peculiarities are the subject matter of the provisions of the Sale of Goods Act, 1930.

We also have a summary of the Sale of Goods Act 1979 here.

FORMATION OF CONTRACT OF SALE

CONTRACT OF SALE OF GOODS

A contract of goods is a contract whereby the seller transfers or agrees to transfer the property to goods to the buyer for a price. There may be a contract of sale between one part-owner and another [Sec. 4(1)]. A contract of sale may be absolute or conditional [Sec 4(2)].

The term ‘contract of sale’ is a generic term and includes both a sale and an agreement to sell.

Sale and agreement to sell: when under a contract of sale, the property in the goods is transferred from the seller to the buyer, the contract is called a ‘sale’, but where the transfer of the property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an ‘agreement to sell’ [Sec. 4(3)]. An agreement to sell becomes a sale when time elapses or the conditions, subject to which the property in the goods is to be transferred are fulfilled [Sec. 4(4)].

ESSENTIAL ELEMENTS OF A CONTRACT OF SALE

Two parties: there must be 2 distinct parties i.e. a buyer and a seller, to affect a contract of sale and they must be competent to contract. ‘Buyer’ means a person who buys or agrees to buy goods [Sec. 2(1)]. ‘Seller’ means a person who sells or agrees to sell goods [Sec. (13)].

Goods: there must be some goods the property in which is or is to be transferred from the seller to the buyer. The goods which form the subject-matter of the contract of sale must be movable. Transfer of immovable property is not regulated by the Sale of Goods Act.

Price: Price is an essential ingredient for all transactions of sale and in the absence of the price or the consideration, the transfer is not regarded as a sale. The transfer by way of sale must be in exchange for a price. It has been held that price normally means money. The price can be paid fully in cash or it can be partly paid and partly promised to be paid in future. The price can be fixed by the agreement between the parties before the conveyance of the property

Transfer of general property: There must be a transfer of general property as distinguishes from special property in goods from the seller to the buyer. For e.g. if A owns certain goods he has general property in the goods. If he pledges them with B, B has special property in the goods.

Essential elements of a valid contract: All essential elements of a valid contract must be present in the contract of sale.

EFFECT OF DESTRUCTION OF GOODS

Goods perishing before making of contract (Sec 7): A contract for the sale of specific goods is void if at the time when the contract was made, the goods have, without the knowledge of the seller, perished. The same would be the case where the goods become so damaged as no longer to answer to their description in the contract.

Goods perishing after the agreement to sell but before the sale is effected (Sec.8): An agreement to sell specific goods becomes void if subsequently the goods, without any fault on the part of the seller or the buyer, perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, ‘Fault’ means wrongful act or default [Sec 2(5)]

CASE STUDY

Bathroom city washed its hands of the problem

Simon Bell, of King’s Lynn, Norfolk, has been battling with Bathroom City, Birmingham, over a cracked bathroom unit for six months after buying a shower tray, cabinet and basin in March. The delivery did not turn up for a month, despite a promise that it would arrive within days. Mr. Bell, left, who is a former heating and plumbing engineer, says:

“When the delivery was made I inspected the goods and could see nothing wrong. But because the delivery was so late I missed my opportunity to fit it immediately.”

It wasn’t until a couple of days later that he noticed a “hairline crack” on the basin when he took it out of the box. He sent a photograph of the damage to Bathroom City, which said that there was nothing it could do because he had not reported it within two days of delivery. The company also claimed that it did not look like a manufacturing fault but damage caused when fitting the taps. However, Consumer Direct says that it is the duty of Bathroom City to prove that it was not responsible; if it cannot, then the company owes Mr Bell a replacement or repair. Mr. Bell says:

“Bathroom City has refused to budge and my e-mails and letters have been ignored. I have fitted many bathroom suites over the years and have never broken anything. What’s more, I know that it is impossible to inflict this type of damage with modern taps.”

After being contacted by Times Money, Bathroom City offered to replace the basin as a goodwill gesture, but maintains that it has “clear proof” that it did not damage the basin because “Mr. Bell clearly states that when it was delivered he checked the goods over and found no initial fault”.

Question 1: Identify the elements of sale of goods

The elements of sale of goods present in this case study are as follows:

• Two parties: there are 2 parties present here that is the buyer (Simon Bell) and the seller, (Bathroom City, Birmingham)
• Goods: the goods which should be transferred from the seller to the buyer are a shower tray, cabinet and basin. These goods which form the subject-matter of the contract of sale are movable.
• Price: Though nothing about price or money is mentioned, it is obvious that a certain amount of cash is paid, (naturally speaking) because the goods mentioned are not gifts and are brought from the bathroom city by Mr. Simon Bell
• Transfer of general property: the goods show the nature of general property.

Essential elements of a valid contract: the essential elements if a contract are as follows:

• Two parties: As mentioned before, there are two parties mentioned in the given case study that is the buyer (Simon Bell) and the seller, (Bathroom City, Birmingham)
• Offer/Acceptance: there is an agreement seen in the case study i.e. the goods offered by the company, The Bathroom city are accepted by the customer, Mr. Simon Bell.
• Legal Obligation: the legal formalities of the contract are not clearly mentioned but since there is a promise being mentioned that the goods would arrive within days, it is assumable that the required statutory formalities are complied with.

Question 2: Identify in which point the case supports or deviates the rules of sale of goods act.

The instances when the case deviate the rules of sale of goods act:

The goods where not delivered as promised by the promise (the bathroom city)

According to (Sec.11) which relates to stipulation as to time, in a contract of sale, stipulations other than those relating to the time of payment are regarded as of the essence of the contract. Thus, if a time if fixed for the delivery of goods, the delivery must be made at the fixed time; otherwise the other party is entitled to put an end to the contract.

The mode of payment is not mentioned the given case

Lack of mutual consent

The bathroom city refused to respond to the e-mails and letters of Mr. Bell.

According to the company, “Mr. Bell clearly states that when it was delivered he checked the goods over and found no initial fault” but Mr. Bell insisted on the fact that the basin be either fixed or replaced as it had been damaged prior to its fitting

The instances when the case supports the rules of sale of goods act:

All the essential elements of the Sale of Goods Act are clearly present in the case except for the price of the goods as mentioned in the answer to the previous question.

Two parties: there are 2 parties present here that is the buyer (Simon Bell) and the seller, (Bathroom City, Birmingham)

Goods: the goods which should be transferred from the seller to the buyer are a shower tray, cabinet and basin. These goods which form the subject-matter of the contract of sale are movable.

Price: Though nothing about price or money is mentioned, it is obvious that a certain amount of cash is paid, (naturally speaking) because the goods mentioned are not gifts and are brought from the bathroom city by Mr. Simon Bell

Transfer of general property: the goods show the nature of general property.

Essential elements of a valid contract: the essential elements if a contract are present.

All the essential elements of the contract (according to Indian contract act, 1872) are also present.

CONCLUSION

From the above case study we can conclude that a contract for the sale of immovable property is a contract laying down that the ‘Sale’ of such property shall take place on the terms settled between the parties in the said contract. Such contract for sale does not create any interest in or charge on such immovable property. The contract for sale does not result in any transfer of ownership. However a sort of obligation is created in respect of the ownership of the property.

BIBILIOGRAPHY

Business Laws by N.D Kapoor

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