Sampurna batch

Test no - 10
Subject - Law
TOPIC - CHAPTER NO :- 2 SALE OF GOODS ACT 1930 (UNIT 3,4)

QUESTION 1:-
Explain the circumstances in detail in which non- owner can convey better title to Bona fide purchaser of goods for
value as per the Sale of Goods Act, 1930. ( 6 MARKS )

SOLUTION:-
In the following cases, a non-owner can convey better title to the bona fide purchaser of goods for value.
(1) Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods for document of title to goods would
pass a good title to the buyer in the following circumstances; namely;
(a) If he was in possession of the goods or documents with the consent of the owner;
(b) If the sale was made by him when acting in the ordinary course of business as a mercantile agent; and
(c) If the buyer had acted in good faith and has at the time of the contract of sale, no notice of the fact that the seller
had no authority to sell (Proviso to Section 27).

Mercantile Agent means an agent having in the customary course of business as such agent authority either to sell
goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods
[Section 2(9)].

(2) Sale by one of the joint owners (Section 28): If one of several joint owners of goods has the sole possession of
them by permission of the co- owners, the property in the goods is transferred to any person who buys them from
such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority
to sell.

(3) Sale by a person in possession under voidable contract: A buyer would acquire a good title to the goods sold to
him by a seller who had obtained possession of the goods under a contract voidable on the ground of coercion,
fraud, misrepresentation or undue influence provided that the contract had not been rescinded until the time of the
sale (Section 29).

(4) Sale by one who has already sold the goods but continues in possession thereof: If a person has sold goods but
continues to be in possession of them or of the documents of title to them, he may sell them to a third person, and if
such person obtains the delivery thereof in good faith and without notice of the previous sale, he would have good
title to them, although the property in the goods had passed to the first buyer earlier. A pledge or other disposition
of the goods or documents of title by the seller in possession are equally valid [Section 30(1)].

(5) Sale by buyer obtaining possession before the property in the goods has vested in him: Where a buyer with the
consent of the seller obtains possession of the goods before the property in them has passed to him, he may sell,
pledge or otherwise dispose of the goods to a third person, and if such person obtains delivery of the goods in good
faith and without notice of the lien or other right of the original seller in respect of the goods, he would get a good
title to them [Section 30(2)]. However, a person in possession of goods under a ‘hire-purchase’ agreement which
gives him only an option to buy is not covered within the section unless it amounts to a sale.

(6) Effect of Estoppel: Where the owner is estopped by the conduct from denying the seller’s authority to sell, the
transferee will get a good title as against the true owner. But before a good title by estoppel can be made, it must be
shown that the true owner had actively suffered or held out the other person in question as the true owner or as a
person authorized to sell the goods.
(7) Sale by an unpaid seller: Where an unpaid seller who had exercised his right of lien or stoppage in transit resells
the goods, the buyer acquires a good title to the goods as against the original buyer [Section 54 (3)].

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(8) Sale under the provisions of other Acts:
(a) Sale by an Official Receiver or Liquidator of the Company will give the purchaser a valid title.
(b) Purchase of goods from a finder of goods will get a valid title under circumstances [Section 169 of the Indian
Contract Act, 1872]
(c) A sale by pawnee can convey a good title to the buyer [Section 176 of the Indian Contract Act, 1872]

QUESTION 2 :-
Referring to the provisions of the Sale of Goods Act, 1930, state the rules provided to regulate the “Sale by
Auction.” ( 5 MARKS )

SOLUTION:-
Legal Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930 provides following rules to regulate the sale by
auction:

(a) Where goods are sold in lots: Where goods are put up for sale in lots, each lot is prima facie deemed to be subject
of a separate contract of sale.

(b) Completion of the contract of sale: The sale is complete when the auctioneer announces its completion by the
fall of hammer or in any other customary manner and until such announcement is made, any bidder may retract
from his bid.

(c) Right to bid may be reserved: Right to bid may be reserved expressly by or on behalf of the seller and where such
a right is expressly reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction.

(d) Where the sale is not notified by the seller: Where the sale is not notified to be subject to a right to bid on behalf
of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the
auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be
treated as fraudulent by the buyer.

(e) Reserved price: The sale may be notified to be subject to a reserve or upset price; and

(f) Pretended bidding: If the seller makes use of pretended bidding to raise the price, the sale is voidable at the
option of the buyer

QUESTION 3 :-
Describe the consequences of “destruction of goods” under the Sale of Goods Act, 1930, where the goods have
been destroyed after the agreement to sell but before the sale is affected. ( 5 MARKS )

SOLUTION:-
Destruction of Goods-Consequences: In accordance with the provisions of the Sale of Goods Act, 1930 as contained
in Section 7, a contract for the sale of specific goods is void if at the time when the contract was made; the goods
without the knowledge of the seller, perished or become so damaged as no longer to answer to their description in
the contract, then the contract is void ab initio. This section is based on the rule that where both the parties to a
contract are under a mistake as to a matter of fact essential to a contract, the contract is void.

In a similar way Section 8 provides that an agreement to sell specific goods becomes void if subsequently the goods,
without any fault on the part of the seller or buyer, perish or become so damaged as no longer to answer to their
description in agreement before the risk passes to the buyer. This rule is also based on the ground of impossibility of
performance as stated above

It may, however, be noted that section 7 and 8 apply only to specific goods and not to unascertained goods. If the
agreement is to sell a certain quantity of unascertained goods, the perishing of even the whole quantity of such
goods in the possession of the seller will not relieve him of his obligation to deliver the goods.

QUESTION 4:-

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J sold a machine to K. K gave a cheque for the payment. The cheque was dishonoured. But J handed over a
delivery order to K. K sold the goods to R on the basis of the delivery order. J wanted to exercise his right of lien
on the goods. Can he do so under the provisions of the Sale of Goods Act, 1930? ( 4 MARKS )

SOLUTION:-
The right of lien and stoppage in transit are meant to protect the seller. These will not be affected even when the
buyer has made a transaction of his own goods which were with the seller under lien. But under two exceptional
cases these rights of the seller are affected: -

1. When the buyer has made the transaction with the consent of the seller
2. When the buyer has made the transaction on the basis of documents of title such as bill of lading, railway receipt
or a delivery order etc.

In the given case, J has sold the machine to K and K gave a cheque for the payment. But the cheque was dishonoured
that means J, the seller is an unpaid seller. So, he is entitled to exercise the right of lien, but according to section
53(1) his right of lien is defeated because he has given the document of title to the buyer and the buyer has made a
transaction of sale on the basis of this document. So, R who has purchased the machine from K can demand the
delivery of the machine

QUESTION 5 :-
Akansh purchased a Television set from Jethalal, the owner of Gada Electronics on the condition that first three
days he will check its quality and if satisfied he will pay for that otherwise he will return the Television set. On the
second day, the Television set was spoiled due to an earthquake. Jethalal demands the price of Television set from
Akansh. Whether Akansh is liable to pay the price under the Sale of Goods Act, 1930? If not, who will ultimately
bear the loss? ( 4 MARKS )

SOLUTION:-
As per the provisions of Section 24 of the Sale of Goods Act, 1930, when goods are delivered to the buyer on
approval or “on sale or return" or other similar terms, the property therein passes to the buyer-

when the buyer signifies his approval or acceptance to the seller or does any other act adopting the transaction;
if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection,
then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been
fixed, on the expiration of a reasonable time; or

he does something to the good which is equivalent to accepting the goods e.g. he pledges or sells the goods. Further,
as per Section 8, where there is an agreement to sell specific goods, and subsequently the goods without any fault
on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the
agreement before the risk passes to the buyer, the agreement is thereby avoided.

According to above provisions and fact, the property is not passes to Akansh i.e. buyer as no condition of Section 24
is satisfied. Hence, risk has not passed to buyer and the agreement is thereby avoided. Akansh is not liable to pay the
price. The loss finally should be borne by Seller, Mr. Jethalal.

QUESTION 6 :-
A, who is an agent of a buyer, had obtained the goods from the Railway Authorities and loaded the goods on his
truck. In the meantime, the Railway Authorities received a notice from B, the seller for stopping the goods in
transit as the buyer has become insolvent. Referring to the provisions of Sale of Goods Act, 1930, decide whether
the Railway Authorities can stop the goods in transit as instructed by the seller? ( 6 MARKS )

SOLUTION:-
The right of stoppage of goods in transit means the right of stopping the goods after the seller has parted with the
goods. Thereafter the seller regains the possession of the goods.
This right can be exercised by an unpaid seller when he has lost his right of lien over the goods because the goods
are delivered to a carrier for the purpose of taking the goods to the buyer. This right is available to the unpaid seller
only when the buyer has become insolvent. The conditions necessary for exercising this right are: -

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1. The buyer has not paid the total price to the seller
2. The seller has delivered the goods to a carrier thereby losing his right of lien
3. The buyer has become insolvent
4. The goods have not reached the buyer, they are in the course of transit. (Section 50, 51 and 52)

In the given case A, who is an agent of the buyer, had obtained the goods from the railway authorities and loaded
the goods on his truck. After this the railway authorities received a notice from the seller B to stop the goods as the
buyer had become insolvent.

According to the Sales of Goods Act, 1930, the railway authorities cannot stop the goods because the goods are not
in transit. A who has loaded the goods on his truck is the agent of the buyer. That means railway authorities have
given the possession of the goods to the buyer. The transit comes to an end when the buyer or his agent takes the
possession of the goods.

DATE :- 14/10/2023 MARKS:- 30 DAY:- SATURDAY