April 16, 2021

Performance of the Contract under Sale of Goods Act, 1930

Introduction

A contract of sale of goods under the Sale of Goods Act, 1930 is a contract between the two parties, one known as the ‘seller’ and the other the ‘buyer’ in which the seller should transfer or agree to transfer the ownership of the property in the subject matter of ‘goods’ to the buyer for a ‘price’ consideration. The parties to any contract are bound to perform their obligations under the contract and as far as a contract of sale of goods is concerned, it is the duty of the seller to deliver the goods and of the buyer to accept and pay for them following the terms of the contract of sale under Section 31 of the Sale of Goods Act, 1930. Section 31 to 40 of the Sale of Goods Acts, 1930 provides the rules and regulations that govern the sale of goods their delivery by the seller obliged under the performance of the contract.

Section 31- Duties of seller and buyer

Section 32- Payment and delivery are concurrent conditions

Section 33- Delivery

Section 34- Effect of part Delivery

Section 35- Buyer to apply for delivery

Section 36- Rules as to delivery

Section 37- Delivery of wrong quantity

Section 38- Instalment delivery

Section 39- Delivery to carrier or wharfinger

Section 40- Risk where goods are delivered at a distant place

Seller’s duty to deliver the goods

According to Section 31, it is the duty of the seller to deliver the goods under the contract of sale of goods. Delivery of goods, according to Section 2(2), means voluntary transfer of possession of goods from one person to another. Delivery of the 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 his agent as per Section 33 of the Act. It means that the delivery may either be actual or symbolic or constructive.

Actual Delivery: When the goods which constitute the subject-matter of the contract, are handed over by the seller to the buyer, there is the actual delivery of the goods. The goods don’t need to be delivered immediately. The actual control of goods can be possible even after 

Symbolic Delivery: In symbolic delivery, there is no actual transfer of the goods from one hand to another but some symbols representing those goods are transferred from one person to another so that the transferee can have control over the goods. In this case, the goods may remain where they are but the control over them shifts from one person to another. For example, the key of the warehouse is transferred by which a transferee has control over the goods.

Constructive Delivery: When there is neither an actual delivery of the goods nor a symbolic delivery of anything representing those goods but there is only doing of something which the parties treat as the delivery of the goods. It is also known as fictitious delivery or delivery by attornment/acknowledgment. The constructive delivery may be made in the following ways:

When the seller owns the goods but holds them on the behalf of the buyer as an agent or bailee. In such a case, the seller continues to have custody of the goods but his legal character changes.

When the goods at the time of sale are already in the possession of the buyer himself as a bailee or an agent for the seller, but the seller agrees to the buyer now holding those goods as the owner, there is the transfer of legal character and the goods are deemed to be delivered.

When the goods are in the possession of the third person and he/she hold on behalf of the buyer with the consent of both buyer and seller, the goods are then deemed to be delivered to the buyer and there is a constructive delivery.

In the case of CTI Group Inc. v. Transclear SA[1], it was held that before the default of a supplier could be attributed to a seller, the supplier had to legally oblige the seller to make the supply. If a supplier who failed to make the contemplated supply was not legally bound to make the supply, he could not be said to have been at fault and that there was no relevant fault to be attributed to the seller.

Rules Regarding Delivery

Delivery according to contract: According to Section 31, the seller is bound to deliver the goods under the contract. The contract may provide about the time, place, and the manner of delivery of the goods, the seller is bound to observe the same.

Time of delivery: If the contract between the parties does not provide anything different, then according to Section 32, the delivery of the goods and the payment of the price are concurrent conditions, which means that the seller shall be prepare and willing to deliver the goods to the buyer in reciprocity for the price, and the buyer shall be prepare and willing to pay the price in exchange for the delivery of the goods.

In Vishnu Sugar Mills Ltd. v. Food Corporation of India[2], the respondent, i.e., Food Corporation of India purchased some ‘levy sugar’ from the petitioner, i.e., Vishnu Sagar Mills under a statute that requires the compulsory sale of sugar at certain rates. The said Corporation had always been paying against the deliveries, but then it unilaterally changed the procedure of payment for the sugar purchased. The new procedure was a bit complex and involved a considerable delay in the payment after the sugar got delivered. In a writ petition by the petitioner, it was held by the Full Bench of the Patna High Court that where there is a compulsory sale of sugar under a Statute, and there is no agreement regarding the time/ delivery of the goods, then there should be concurrent tender of price against the delivery, as envisaged under Section 32 of the Sale of Goods Act, 1932. Therefore, the difference procedure adopted by the Food Corporation of India was illegal and hence, quashed.

Buyer’s duty to apply for delivery: According to Section 35 of the Sale of Goods Act, 1930, the buyer is bound to apply for the delivery of the goods before the seller can be expected to deliver them. The application for delivery must have been properly made. Such an application for delivery by the buyer is required both in the ready and future goods. Also, the buyer’s demand delivery is subject to any express contract between the parties.

In Food Corporation of India v. Arosan Enterprises Ltd.[3], there was a contract for the sale of sugar to a buyer for his urgent need for Dussehra, Diwali festivals. The buyer agreed to the extension of the delivery date but the sugar was not supplied even then. It was held that since he needed the sugar urgently for festivals, he was justified in not extending the delivery period any further. Additionally, According to Section 55 of the Indian Contract Act, 1872, if there is a delay in the delivery of the goods by the seller and the time of delivery is the essence of the contract, the buyer may reject the goods, but if the time is not the essence of the contract, such delay would entitle the buyer to claim compensation only.

Place of Delivery: The parties to the contract are free to decide about the place of the delivery of the goods and construe the agreement for the same. If the contract does not indicate the place of delivery, like in the case of a sale, the place of delivery is the place where the goods are at the time of sale. In an agreement to sell, the place of delivery is the place where the goods are at the time of agreement to sell. In the case of future goods which are yet to be manufactured or produced, the place of delivery is the place at which they are manufactured or delivered.

Expenses of delivery: According to Section 36(5), the incidental expenses of putting the goods in a deliverable state shall be borne by the seller unless otherwise agreed that means if the goods are not in a deliverable state at the time of the contract, then the buyer is bound under the contract to take their delivery, the expenses of putting them in a deliverable state must be borne by the seller. If such expenses have been borne by the buyer, then he or she can, later on, recover them from the seller.

Effect of part delivery on the passing of property: It may be agreed between the parties that the property in the goods would pass when the goods are delivered. However, sometimes only a part of the goods is delivered and hence, a question arises- Does the property only in the part of the goods which have been delivered or that in the whole of the goods, pass from the seller to the buyer. According to section 34, the circumstances in which the delivery had been made have to be looked into and the position, are contained in that section, is as under:

Delivery of part of the goods, in the progress of the delivery of the whole, has the same effect, to pass the property in such goods, as a delivery of the whole.

When the delivery of the part is not made in the progress of the delivery of the whole, but it is made to sever the part from the whole, that does not operate as the delivery of the remainder.

In the case of Hammond v. Anderson[4], the seller requests the buyer to take the delivery of 1,000 bags of wheat which he has sold to the buyer and the buyer arranges his transport to carry 100 bags in one trip. The buyer has taken away 200 bags in two trips and before the remainder could be taken away, they are destroyed by an accidental fire. In this case, the delivery of the part goods has been made in the progress of the delivery of the whole and if the parties agreed to the passing of property on delivery, the property in all the 1,000 bags would pass when the process of transporting was started by the buyer and he will have to bear the loss of the remaining 80 bags. Similarly, when the buyer, with a view of taking delivery, gets the whole of the goods weighed but takes away only a part of them, the delivery of the part would operate as the delivery of the whole.

Delivery of goods in wrong quantity or of different description: Seller must deliver the good following the terms of the contract. This includes the duty to deliver goods of the same quality, in the requisite quantity, and accordance with their description given in the contract. Section 37 covers the cases where the performance is not according to the contract. These are:

When the goods are delivered in less quantity than the seller contracted to sell: In this case, the buyer has full right either to reject the goods or accept them. The buyer’s right of rejection is subject to the rule de minimis non curat lex (the law does not take trivial action into account), and, therefore, if there is a slight deficiency in the goods supplied that must be overlooked. In the case of Barium Chemicals Ltd. v. Andhra Pradesh Mining Corporation Ltd.[5], a contract was to supply 16,000 Kgs of rice, but there was a shortage of only 522 Kgs. The ‘de minimis’ rule was applicable, and the buyer could not refuse to take the delivery of the goods.

When the goods are delivered in a larger quantity than the seller contracted to sell: In this case, the buyer may accept the goods included in the contract and reject the rest, or may reject the whole of the goods, or may accept the whole of the goods. This principle is also subject to the rule de minimis non curat lexis, i.e., the law does not take trivial action into account.

When the goods are delivered of a different description missed with the goods which the seller contracted to sell: In this case, the buyer has full right either to reject the goods or accept them. In the case of Moore & Co. v. Landauer & Co.[6], there was a contract for the supply of 3,000 tins of canned fruit which were to be packed in cases, each case containing 30 tins. About one-half of the tins were packed in cases, each case containing 24 tins. It was held that the buyer was entitled to reject the whole of the consignment.

Instalment deliveries: According to Section 38(1), it is expected that the seller shall deliver the goods in one lot and the buyer shall not be bound to accept the delivery in instalments. If, however, the parties so agree, the delivery of the goods may be made by instalments. Also, under Section 38(2), we have to look at the terms of the contract and the circumstances of the case before deciding whether it amounts to the breach of the whole of the contract or a breach of the part only. Two factors have to be kept in mind, firstly, the quantitative proportion which the breach bears to the whole contract and, secondly, the degree of probability of the repetition of the breach.

In Moti Lal v. The Netha Cooperative Spinning Mills Ltd.[7], there was a contract for supplying 500 bales of cotton of a certain variety. The first instalment of 50 bales was supplied and accepted but the buyers rejected the second instalment of 50 bales as they were adulterated with waste cotton mix and the cotton was of inferior quality and asked the seller not to supply further goods. It was held that the buyer was justified in repudiating the whole contract. Moreover, the sellers were not entitled to claim any damages, as they did not tender any further instalments within the contract period but agreed to the repudiation of the contract made by the buyer.

Delivery to Carrier or Wharfinger: According to Section 39(1) of the Act, the effect of delivery of the goods to the carrier or wharfinger without reservation of the right of disposal will be deemed to be delivery to the buyer and the property and the risk of loss to the goods will have to be borne by the buyer. This presumption can be rebutted by the seller reserving the right of disposal by taking the document of title in his name or the name of some third person, and in such a case, the delivery of the goods is not deemed to be to the buyer but to some other person who is entitled to receive the goods under the document of title. Section 39(2) imposes a duty upon the seller when he delivers the goods to the carrier or wharfinger to make such contract with the carrier or the wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits to do that and the goods are lost or damaged in the course of transit or whilst in the custody of the wharfinger, the buyer may decline to treat the delivery to the carrier or wharfinger as a delivery to himself or may hold the seller responsible in damages. Additionally, under Section 39(3), the seller has a further duty to give notice to the buyer which will enable him to insure the goods during sea transit, if the goods require such insurance.

In Young v. Hobson[8], the sellers were to dispatch electric engines by Rail to the buyers. The sellers dispatched the engines through Railway and instead of sending them at the Railway’s risk, they sent them at the owner’s risk. On the way, the engines were damaged. It was held that the contract of carriage made by the sellers was not reasonable in the circumstances of the case and buyers were entitled to reject the engines.

  1. Risk where goods are delivered at a distant place: According to Section 40 of the Act, even if the seller undertakes to be liable for the loss or damage to the goods during transit, such loss does not include loss which is caused by deterioration in the goods necessarily incident to the course of transit. In Bull v. Robinson[9], the seller sent hoop iron from Staffordshire, the place of its manufacture, to Liverpool. The iron was clean and bright when it was despatched but became rusted before it reached its destination. It was held that the seller was not responsible for such deterioration.

In the case of perishable goods which are consigned to a distant place, the rule is that they should not only be merchantable when despatched by the seller but also that they are in a condition that they remain merchantable during transit and for a reasonable time thereafter. In Beer v. Walker[10], the rabbits when dispatched from London were sound but unfit for human consumption when they reached Brighton. It was held that the buyer was entitled to reject the rabbits.


[1] (2007) EWHC 2010 (Comm).

[2] AIR 1872 Pat. 22.

[3] AIR 1996 Delhi 126.

[4] (1830) 1 B. & P.N.R. 69.

[5] (1980) Andh. W.R. 350.

[6] (1921) 2 K.B. 519.

[7] AIR 1975 AP 169.

[8] (1949) 65 T.L.R 365.

[9] (1854) 10 Ex. 342.

[10] 46 L.J.P.C. 677.

Author: Shaily Garg (University Institute of Legal Studies, Panjab University, Chandigarh)

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