cases sales of goods 1930 law

1. CASE LAWS : Sale of Goods Act

2. Definition of goods

3. CASE 5.1
Petitioner: Rash Behari Singh and Others vs Respondent: Emperor*
Date of Judgement: 7 October 1936:
Facts: The appellants were accused persons who were charged with having
been party to a criminal conspiracy to commit theft by dishonest
consumption and use of electrical energy belonging to the Calcutta
Electric Supply Corporation between the January
1934 and 20 January 1935, and in consequence of such conspiracy theft was
committed at Bharat Laxmi Cinema, Jupiter Cinema, and at other places. It
was argued that Sec. 19 (a), Electricity Act, and Rule 31 were necessitated
by the fact that there can be no actual property in electrical energy.
Judgement: The appellants found guilty of conspiracy and theft and
sentenced to fine and imprisonment.
Reason: The evidence supplied showed that there was conspiracy to theft
and altering of the electricity meter.

4. Formation of a Contract

5. CASE 5.2 Petitioner: Union of India vs Respondent: Central India Machinery
Manufacturing Co. Ltd*
Date: 6 April 1977
Facts: The contract was for the manufacture and supply of wagons. It was provided
that the contract would be governed by the standard conditions in so far as they
are not inconsistent with the correspondence exchanged between the parties.
Under the standard conditions, 90 per cent of the payment had to be made
against the company
submitting the bill to the purchaser together with the completion certificate and on
payment of such 90 per cent price the vehicle in question would become the property
of the purchaser. The balance of 10 per cent was to be treated as security for the
due fulfillment of the contract. The balance was to be received on the receipt of
certificate from the purchaser to the effect that the actual delivery of the vehicle was
taken and that the delivery was made in due time. The respondents contended that
there was nothing in the special conditions which militated or was inconsistent with
the standard condition no. 15.The special conditions, read as a whole, show that the
raw materials purchased by the company against 90 per cent of advance payment do
not become the property of the railway board or the Union of India because under
the express terms of the contract, such advance payment is made towards the
contract price of the wagons and not towards price of the materials.

6. Judgement: Petition was dismissed
Reason: Transfer of property in goods for a price is the
lynchpin of the definition of ‘sale’, the difficulty in
distinguishing between the contract of sale and work
contract is an age old one. The test would be whether
the thing to be delivered has any individual existence
before delivery as the sole property of the party who is
to deliver it. If the answer is in the affirmative, it is sale
of the thing, otherwise not. Another rule is that
if the main object of the contract is the transfer from A to
B for a price of the property in a thing in which B had
no previous property, then the contract is a contract of
sale

7. Classification of goods

8. CASE 5.3
Petitioner: Badri Prasad vs Respondent: State of Madhya Pradesh*
Date: 11 October 1968
Facts: The appellant entered into a contract in respect of certain forests in a jagir in
Madhya Pradesh. He was entitled to cut teak trees with over 12-inch girth. After
the passing of the Abolition of Proprietary Rights (Estates, Mahals. Alienated
Lands) Act, 1950, a notification was issued vesting the estate in the State. The
appellant was prohibited from cutting timber in exercise of his rights under the
contract . After some negotiations, a letter was written on 1 February 1955, to the
appellant, on behalf of the State, that the appellant’s claim to cut trees under the
contract would be considered only if he gave up his claim to a sum of `17,000
which he had already paid under the contract and was willing to pay a further sum
of `17,000.The appellant, by his letter dated 5 February 1955 expressed his
willingness to pay the additional sum but reserved his right to claim a refund of
the first sum .The state government rejected the appellant’s right to cut trees. He
then filed a suit claiming specific performance of the contract on the grounds: (1)
The forest and trees did not vest in the State under the Act; (2) Even if they vested,
the standing timber, having been sold to the appellant, did not vest in the State;
and (3) In any event a new contract was completed on 5 February 1955, and the
appellant was entitled to its specific performance.

9. Judgement: Appeal fails and dismissed.
Reason: The forest and trees vested in the State under the Act. The
plaintiff was entitled to cut teak trees of more than 12-inch girth. It
had to be ascertained which trees fell within that Description .Till
this was ascertained, they were not ‘ascertained goods’ within Sec.
9 of the Sale of Goods Act. The contract was not to sell the whole of
the trees. It is extremely doubtful whether the letter, dated 1
February 1955, is an offer. It seems to be an invitation to the
plaintiff to make an offer. Be that as it may, even if it is treated as an
offer there was no unconditional acceptance by the letter, dated 5
February 1955.The plaintiff expressly reserved his right to claim a
refund of `17,000.According to the letter of the Divisional
Forest Officer, dated 1 February 1955, the plaintiff had to give up his
claim to `17,000 which he had already paid and had to pay a further
sum of `17,000. It is rightly held that the alleged acceptance of the
offer made on 1 February 1955, was conditional and qualified.

10. Warranty & Condition

11. CASE 5.4
Petitioner: Antony Thomas vs Respondent: Ayuppunni Mani*
Date of Judgement: 28 October 1959
Facts: The respondent had undertaken to deliver to the appellant 125 bundles of
cashew nuts and received `4,000 in part payment of the price. The suit was for the
refund of the said sum with interest at 6 per cent per annum. The appellant
rejected the goods on the ground that the bad nuts exceeded the stipulated
maximum of twenty per cent. The question for consideration is whether he was
entitled to reject the goods as he did.
Judgement: Appeal is dismissed.
Reason: The answer depends on whether the stipulation regarding the bad nuts was a
condition or a warranty. Sec. 12 of the Indian Sale of Goods Act, 1930, deals with
conditions and warranties as follows:
1. A stipulation in a contract of sale with reference to goods which are the subject
thereof may be a condition or warranty.
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.
3. 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.

12. Whether a stipulation in a contract of sale is a condition of a warranty depends in each
case on the construction of the contract. A stipulation may be a condition, though it
may be called a warranty in the contract. It is clear that a condition is a more vital
undertaking than a warranty, and that the consequences that flow from its breach
are different. The comparative degree of gravity spells a condition as distinct from
one, which amounts only to a warranty. The distinction is of great importance. The
breach of a condition entitles the injured party to repudiate the contract, to refuse
the goods, and, if he has already paid for them, to recover the price. The only
remedy for the breach of a warranty is the recovery of damages. The sale was by
description, and there is an implied condition that the goods shall correspond with
the description. The section on which he relies is Sec.
15 of the Indian Sale of Goods Act, 1930, which provides that where there is a contract
for the sale of goods by description, there is an implied condition that the goods
shall correspond with the description. The general principle of this implied
condition is clear and founded on the consensual basis of the law of contract. The
stipulation is definite, and there are no words which indicate any room for
elasticity in complying with the stipulation. The sale was, therefore, a sale by
description and that there was an implied condition that the goods must comply
with the description

13. Transfer of Goods

14. CASE 5.5
Petitioner: Hoogly Chinsurah Municipality vs Respondent: Spence Ltd*
Date of Judgement: 18 July 1977
Facts: Hoogly Chinsurah Municipality contracted with Spence Ltd to
buy a tractor on the condition that if the municipality was not
satisfied it would reject the tractor. The municipality took
possession of the tractor and after using it for a month
and a half it rejected it. The suit was filed upon the unwillingness of
the tractor company to accept it.
Judgement: Appeal dismissed.
Reason: The municipality had not only used the tractor but also a
reasonable time had elapsed. Hence the property in the tractor had
already passed to the municipality and, therefore, could not reject
it.

15. CASE 5.7 Petitioner: Dharampal & Co.,Agra vs Respondent: Firm Kila Gatla Ram
Chandra Rao & Co.,Vizianagaram* /Date of Judgement: 29 January 1980
Facts:: The suit for recovery of `1,850 as damages from the respondent firm was decreed by
the trial court and future interest at the rate of 4 per cent per annum. A contract was
entered into between the parties by means of a telegram for the purchase of 250 bags
of peas at the rate of `37 per bag, deliverable F.O.R. atVizianagram. The buyer, namely the
respondent, indicated in the telegram that the peas should be friable at 6 1/2.** This
agreement was made on 3 February 1962. On the same day, a wagon was indented by
the plaintiff for the dispatch of goods. He received the wagon on 14 February 1962 and
loaded the peas and dispatched the same day. The wagon reached Vizianagram on 16
February 1962. Meanwhile the plaintiff had also sent a hundi to the defendant and
dispatched the R.R. (railway receipt) for collection through bank. The defendant did not
receive or accept the goods at Vizianagram and he did not also honour the hundi or take
the R.R. from the bank. The defendant’s stand was that the peas sent were not of the
contracted quality and therefore, he sought to repudiate the contract. The plaintiff had to
send a messenger to Vizianagram who took delivery of the consignment of the goods
after paying demurrage to the Railways and sold it to a local dealer at a lower rate with
the result that he incurred loss in the price of the goods also. He, therefore, in this suit
claimed a sum of `833 as demurrage, `142 as miscellaneous expenses, and `875 as the
difference in price, totaling a sum of `.

16. 1,850.The plaintiffs stand was that the defendant could not refuse to take delivery of
the goods and was not entitled to repudiate the contract. He was afforded an
opportunity of examining the goods but he did not avail of the same. The quality
of the goods sent was according to the contract
Judgement: The appeal upheld.
Reason: The Allahabad High Court upheld the verdict of the trial court which held that
the time was not the essence of the contract and the quality of the goods supplied
was not inferior to the contracted quality, the plaintiff suffered damages as
claimed and the court had territorial jurisdiction to try the suit. Lastly, it was held
that the plaintiff was entitled to the damages and the suit was accordingly
decreed. The lower appellate court formulated two points for consideration. The
first point was about the territorial jurisdiction of the court at Agra to try the suit.
This was held in the affirmative and in favour of the plaintiff. The second point was
whether the contract was in respect of the goods of specific description and the
plaintiff failed to satisfy the defendant about the quality of goods, if so, its effect.
This was answered by holding that the goods contracted for purchase, were
of specific description and the plaintiff failed to satisfy the defendant about the quality
of the goods and as such was not entitled to any amount claimed by way of
damages.

17. Rights of unpaid seller

18. CASE 5.7 Petitioner: P.S.N.S.Ambalavana Chettiar & Co., vs Respondent: Express
Newspapers Ltd, Bombay* / Date of Judgement: 10 November 1967**
Facts: Suit under Indian Sale of Goods Act, Secs 18 and 54(2): Sale of unascertained goods:
When property passes; repudiation of contract, vendor’s right of resale when arises.
On 13 November 1951, the respondent agreed to sell to the appellants a stock of
415 tonnes of newsprint in sheets then lying in the respondent’s godown. On 26
November, the parties varied the contract by agreeing that the appellants would buy
only 300 tons out of the stock of 415 tonnes. After taking delivery of a part of the
newsprint, the appellants refused to take delivery of the balance and repudiated the
contract on 29 March 1952. On 21 April the respondent, after notice to the appellants,
resold the balance at a lesser rate. The suit filed by the respondent claiming from the
appellants the deficiency on resale was decreed.
Judgement: The claim of the respondent unsustainable.

19. Reason: As the respondent was not a pledger of the newsprint, the
respondent had no right to sell the goods under Sec. 176 of the
Indian Contract Act. 1872. A seller can claim as damages the
difference between the contract price and the amount realized on
resale of
the goods where he has the right of resale under Sec. 54(2) of the
Indian Sale of Goods Act, 1930. But this statutory power of resale
arises only if the property in the goods has passed to the buyer
subject to the lien of the unpaid seller. Under Sec. 18 of the Sale of
Goods Act, it is a condition precedent to the passing of property under
a contract of sale that the goods are ascertained. In the present
case, when the contract was originally
entered into for the sale of 415 tonnes there was an unconditional
contract for the sale of specific goods in a deliverable state and the
property in those goods then passed to
the appellants.

20. Remedies for Breach of contract of
sale

21. CASE 5.8
Petitioner: Sitaram Srigopal vs Respondent: Smt. Daualti Devi (Dead) By Heirs*
Date of Judgement: 1 October 1979
Facts: On 26 August 1950, Tulsiram Shaw sold 1540 ‘value sluice water flanged and
drilled to B.S.T.C.4’.specific goods for a sum of `35,200 to the partnership firm of
Sitaram Srigopal. The latter paid the entire price in cash to the former.Tulsiram
Shaw further promised to hand over the release order of the goods and/or
delivery order by 28 August 1950, to enable the firm to take delivery of these
goods from Panagarh. Tulsiram neglected or refused to deliver the said release
order in spite of demands by Sitaram Srigopal. On the preceding allegations,
Sitaram Srigopal instituted a suit in the high court of Calcutta againstthe original
defendant,Tulsiram Shaw, on 15 January 1951, for specific performance by the
defendants to deliver the said specific goods on the ground that these goods were
not readily available in the market and were of some big value and, therefore,
damages would not afford adequate relief for the loss of the goods. In the
alternative, the plaintiff claimed refund of the price of `35,200 with interest at 6
per cent per annum and a further sum of `1,32,559 as damages being the
difference between the contract price and the market price of the goods on the
date of the breach, namely, the end of August 1950.The suit was resisted by the
original defendant, who, in his written statement, pleaded that he was, at all
material times ,ready and willing to deliver the release order to the plaintiff and
had, in fact, offered to do so, but the latter requested the defendant to cancel the
contract and refund the amount of `35,200 by cheque on 21 September 1950, but
the plaintiff declined to accept it. During the pendency of the suit, the original
defendant died on 15 November 1959 and his widow, Smt. Daulata Devi and heirs
were impleaded as defendants in place of the deceased.

22. Judgement: Appeal fails. Dismissed with costs.
Reason: It is clear from the above conspectus that the evidence produced by
the plaintiff was
not cogent, convincing, and reliable to establish, either that the goods in
question
comprised were in brand new condition, or the market price of goods of
similar
specifications in August 1950. In view of the circumstantial evidence on the
record,
the court below was not wrong in holding that the market price of the goods
in
question in August 1950 was the same at which they were purchased by the
plaintiff
from Tulsiram Bhagwandas and, consequently, the plaintiff was not entitled
to any
damages, apart from the refund of `35,200 which was the price paid by him

23. Rules of Auction Sale

24. CASE 5.9
Petitioner: Consolidated Coffee Ltd vs Respondent: Coffee Board, Bangalore*
Date of Judgement: 15 April 1980
Facts: The Coffee Board of India is a statutory corporation. Export of coffee outside
India is particularly controlled under the Act and the Rules by the Coffee Board.
Coffee can be exported either by the Coffee Board directly to parties outside India or
the Coffee Board authorizes other exporters to effect such exports. For effecting
exports
through other exporters the Coffee Board periodically conducts auctions known as
‘export auctions’ and it follows a procedure in that behalf.To be able to bid at these
auctions, exporters have to get themselves registered with the Board.
The Coffee Board issued a circular dated 7 February 1977 to the registered
exporters of coffee, by which it took the view that in order to avail of the benefit of
Sec. 5(3) of the Central Sales Tax Act as amended by Amendment Act 103 of 1976,
in respect of the coffee sold by it at the export auctions the registered exporters
(bidders) should satisfy three conditions: (a) they must have an export contract (i.e.,
either agreement or order) from a foreign buyer; (b) they must have it on hand at
the time when they participate in the export auction; and (c) they should give proof
of the export of the coffee purchased at the auction.

25. The petitioners, who are registered exporters of coffee, therefore have filed
under Article 32 of the Constitution raising an important question of proper
construction of Sec. 5(3), of the Central Sales Tax Act as amended by
Amending
Act (103 of 1976) and also challenging the constitutional validity of the
circular
dated 7 February 1977, issued by the Coffee Board, whereby it required the
petitioners and other registered exporters of coffee to furnish contingency
deposits
or bank guarantees equal to the amount of sales tax in respect of the
exempted
sales under the said Sec. 5(3) of the Central Sales Tax Act and praying for its
cancellation or withdrawal and consequential reliefs.

26. Reason: Sec. 5(3) of the Central Sales Tax Act as amended by the Amendment Act 103 of 1976
is not ultra vires to Article 286(2) of the Constitution and the said provision neither
creates any legal Action nor is it beyond the power or authority conferred on
Parliament by Article 286(2) of the Constitution. [645A-D] It is true that the word
deemed has been used in Sec. 5(3) but the same word has been used not merely in
Sec. 5(1) but also in the other two Sec.s 3 and 4 of Chapter II of the Central Sales
Tax Act which has the heading ‘Formulations of Principles’ for determining when a
sale or purchase of goods takes place in the course of inter-state trade or commerce
or outside a State or in the course of export or import.
In the penultimate sales (sales of coffee effected to registered exporters at export
auctions conducted by the Coffee Board) the property in the coffee sold there passes
to the buyer immediately upon payment of full price, weight, and setting apart of
coffee for delivery to the buyer under Cls. 19 and 20 of the Auction Conditions and
it would be at this stage, i.e., just before this stage is reached that the agreement with
or order from a foreign buyer must be available or produced in order to attract Sec.
5 (3) of the Central Sales Tax Act, 1956. [674C-D]
Exporters’ assessments or recoveries if made in conformity with judgement need
not be disturbed. Similarly, contingency deposits or bank guarantees already obtained
by the Coffee Board from the registered exporters, if they are contrary to judgement,
these will be refunded or released forthwith, as the case may be, by the Coffee Board