Short notes on the performance of contract of sale

Performance of a contract of sale implies a duty of the seller to deliver the goods, and of the buyer to accept the delivery of the goods and make payment in accordance with the terms of the contract (sec. 31).

Delivery of Goods :

‘Delivery’ has been defined as voluntary transfer of possession of goods from one person to another.

How is Delivery Made?

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 by him (Sec. 33).

Mode of Delivery :

1. Actual delivery:

Actual delivery means physical transfer of goods by the seller to the buyer. The delivery may be made by the agent of the seller to the agent of the buyer.

2. Symbolic delivery:

Where the goods are bulky, it is usual for the seller to give symbolic delivery. For example, where the timber is lying in a warehouse, the delivery of key is regarded as symbolic delivery which has the effect of putting the buyer in possession or actual control of the goods.

It should be noted that the key must give complete access to the goods. If for example, the key of a room in which the goods are kept is given but the key of the main gate or door is not given, it is not regarded as a valid delivery

3. Constructive delivery:

In place of actual or symbolic delivery, the goods may be delivered without any change in their actual or visible custody. For example, where the goods at the time of sale are in possession of a third person and such third person acknowledges to the buyer that he holds the goods on his (buyer’s) behalf, the delivery is called constructive delivery.

Example:

A sells to B 100 bags of rice lying in C’s warehouse. C acknowledges to B that he is holding these 100 bags on behalf of B. It is constructive delivery by A to B.

Rules Regarding Delivery :

1. Delivery by whom and to whom (Sec. 31):

It is the duty of the seller to deliver the goods and of the buyer to accept and pay for the goods delivered.

2. Delivery and payment are concurrent conditions (Sec. 32):

Unless otherwise agreed, delivery of goods and payment of price are concurrent conditions, i.e., at the same time or reciprocally.

The seller shall be ready and willing to deliver the goods and the buyer shall be ready and willing to pay the price in exchange for delivery of the goods.

3. Mode of delivery (Sec. 33):

This has been discussed in detail in earlier paragraphs. The delivery may be actual, symbolic or constructive. The parties may agree to any mode of delivery expressly or impliedly.

4. Effect of part delivery (Sec. 34):

A delivery of part of the goods, in the process of the delivery of the whole, has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole. However, delivery of part of the goods, with an intention of severing it from the whole, does not operate as a delivery of the remainder.

Example:

A ship arrived at the port laden with a cargo of wheat. The owner endorsed the bill of lading to A. The master of the ship reported to the customs that the cargo was for A. Next day, A made entry of the wheat in his name at the customs house. Thereupon, part of the cargo was delivered to A. Held, this constituted a delivery of the whole [Slubey v. Hey ward].

5. Delivery to be made on request of the buyer (Sec. 35):

Apart from any express contract, a seller is not bound to deliver the goods unless and until requested by the buyer.

If the seller fails to deliver the goods on the application of the buyer, the seller is guilty of breach of contract.

6. Place of delivery [Sec. 36(1)]:

In the absence of an agreement, express or implied, the goods sold are to be delivered at the place at which they are at the time of sale. The goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, or if not then in existence, at the place at which they are manufactured or produced.

7. Time of delivery:

If any time is specified by the parties, the goods must be delivered by that time.

(i) If the seller is bound to send the goods to the buyer and no time has been fixed by the parties, the goods must be delivered within a reasonable time [Sec. 36(2)]. What is reasonable time is a question of fact in each case?

(ii) The demand for delivery should be made at a reasonable hour. What is a reasonable hour is a question of fact?

8. Delivery of goods in possession of third persons [Sec. 36(3)]:

Where the goods at the time of sale are in possession of a third person, there is no delivery by the seller to the buyer unless such third person acknowledges to the buyer that he holds the goods on his behalf.

It should be noted that this rule does not affect the transfer of goods by means of a document of title of goods, e.g., where goods have been sold by a bill of lading, consent of the third party is not necessary.

9. Expenses of delivery:

Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller. In case the buyer is compelled to pay these expenses, he can recover the same from the seller.

10. Effect of delivery of wrong quantity (Sec. 37)

(i) Short Delivery [Sec. 37(1)]:

Where the seller delivers lesser quantity than contracted for, the buyer has the option to accept or reject the whole. Naturally, when he accepts, he must pay for them at the contract price.

Example:

A ordered B to supply 10 bags of rice. B supplied only 6 bags. A is at liberty to accept 6 bags or to reject them. When he accepts them, he must pay for the 6 bags at the contracted price.

Example:

A ordered B to supply 10 bags of rice. B supplied 15 bags. A has the option to accept 10 bags and pay for them. He may accept even 15 bags and pay for him. He is entitled to reject the whole [Cunliffe v. Harrison],

It should be noted that the right to reject the goods in excess of the contract does not apply where the variation is negligible. This is due to the reason that the law does not take account of trifles, i.e., the Court applies the maxim de minimise non curat lex.

(ii) Delivery of mixed goods [Sec. 37(3)]:

Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole.

Example:

Certain specific articles of China were ordered. The seller in addition sent some of his articles of China. Held, the buyer could reject the whole [Levy v. Green.]

These rules can be modified by a contract expressly or implied, i.e., usage or custom of the trade [Sec. 37 (4)].

11. Delivery by installment (Sec. 38):

Unless otherwise agreed, the buyer of goods is not bound to accept delivery in installments. He may, if he so desires, refuse the goods.

Example:

25 tons of pepper October/November shipment was sold. The seller shipped 20 tons in November and 5 tons in December. Held, the buyer was entitled to reject the whole [Reuter v. Sala],

In case there is a contract for the sale of goods to be delivered by stated installments which are to be paid for separately and the buyer or seller commits a breach in respect of one or more installments. In such a case a question arises as to whether the buyer or seller can treat it as a breach of the whole contract, or a severable breach giving rise to a claim for compensation.

The answer to this question would depend upon facts and circumstances of each case. However, the following factors should be kept in mind:

(i) The quantum of breach which it bears to the contract as a whole.

(ii) The degree of probability that it will be repeated [Maple Flock Co. Ltd. v. Universal Products Ltd.

(iii) The nature of breach whether it goes to the root of the transactions.

12. Delivery to carrier or wharfinger (Sec. 39).

(i) Unconditional delivery to carrier or wharfinger means delivery by buyer (sec. 39):

Where in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of goods to a carrier for the purpose of transmission to the buyer or to a wharfinger for safe custody is prima facie deemed to be a delivery of the goods to the buyer.

(ii) Seller’s duty to reasonably secure goods before delivery [Sec. 39(2)]:

Where the goods are delivered to a carrier or wharfinger, it is the duty of the seller to reasonably secure the responsibility of the carrier for the safe delivery of the goods. In case the seller fails to do so, he will be liable to make good the loss suffered by the buyer.

Example:

B, at Agra orders A, who lives at Calcutta, three casks of oil to be sent to him by railway. A takes three casks of oil directed to B to the railway station and leaves them there without conforming to the rules which must be complied with in order to render the railway company liable for their safe carriage. The goods are lost on the way. There has not been a sufficient delivery to charge B in a suit for the price. [Clarke v. Hutchin].

(iii) Seller’s duty to inform the buyer to get the goods insured in case the goods involve a sea transit [Sec. 39(3)]:

Where the goods are sent by the seller to the buyer by a route involving sea transit, the seller is bound to give such notice to the buyer as may enable him to insure the goods during sea transit. Failure to do so will mean that the goods are at the seller’s risk during the transit and the seller will have to make good the loss suffered by the buyer.

13. Acceptance of delivery by the buyer:

(i) Buyer’s right to examine the goods [Sec. 41)]:

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.

When is buyer deemed to have accepted the delivery of goods? (Sec. 42):

A buyer is deemed to have accepted the goods:

(i) When he intimates to the seller that he has accepted them, or

(ii) When he does an act in relation to such goods which is inconsistent with the ownership of the seller.

The buyer has the following options:

(i) Short delivery: Lesser quantity than ordered for. He may accept or reject the whole.

(ii) Excess delivery: More quantity than ordered for. He may accept the quantity asked and pay for the same or reject the whole.

(iii) Delivery of goods ordered mixed with other goods not ordered: He may accept the goods ordered and reject the rest or the whole.

11. The buyer is not bound to accept the delivery by installments.

12. Unconditional delivery to the carrier or wharfinger means delivery to the buyer. In this case, the seller should:

(1) Reasonably secure the goods, and

(2) In case of goods involving sea route, the seller should inform the buyer to get the goods insured.