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BUSINESS LAW

SALE OF GOODS ACT

PRESENTATIONS

SPRING 2016

ASAD HASAN

25-26-27

BUSINESS LAW SALE OF GOODS ACT PRESENTATIONS SPRING 2016 ASAD HASAN 25-26-27
BUSINESS LAW SALE OF GOODS ACT PRESENTATIONS SPRING 2016 ASAD HASAN 25-26-27
BUSINESS LAW SALE OF GOODS ACT PRESENTATIONS SPRING 2016 ASAD HASAN 25-26-27

2

Introduction

2 Introduction The law relating to sale and purchase of goods, prior to 1930 were dealt

The law relating to sale and purchase of goods, prior to 1930 were dealt by the Indian Contract Act, 1872.

In 1930, Sections 76 to 123 of the Contract Act was repealed and a separate Act known as the Sale of Goods Act, 1930 was passed.

The provisions of the Contract Act still apply to contracts of sale of goods except where the Sale of Goods Act, 1930 specifically provides for the contrary.

3

Definition

3 Definition A contract of sale of goods is a contract by which the seller transfers

A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. There may be a contract of sale between one part owner and another. A contract of sale may be absolute or conditional. Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale. Where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.

Essential Features of Sale

4

Essential Features of Sale 4 Bilateral Contract Money Consideration Goods Transfer of Property Essential

Bilateral Contract Money Consideration Goods Transfer of Property Essential Elements of a Contract

Capacity to buy and sell

5

Capacity to buy and sell 5 Capacity to buy and sell is regulated by the general

Capacity to buy and sell is regulated by the general law concerning capacity to contract and to transfer and acquire property. Where necessaries are sold and delivered to a minor or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for them. In subsection above “necessaries” means goods suitable to the condition in life of the minor or other person concerned and to his actual requirements at the time of the sale and delivery.

 

Goods

6

 

Goods means every kind of movable property other than

 

actionable claims and money

includes stocks and shares, growing crops, grass and things attached to or forming part of the land

which are agreed to be severed before sale or under the contract of sale. [Sec 2(7)]

Goods 7 (1) "Goods" means all things (including specially manufactured goods) which are movable at
Goods
7
(1) "Goods" means all things (including specially
manufactured goods) which are movable at the time of
w
identification to the contract for sale other than the money in
h
hi
c
h
t
e pr ce
i
i
s to
b
e pa
id
, nvestment secur t es (
i
i i
A
rt c e
i
l
8
)
and things in action. "Goods" also includes the unborn young
of animals and growing crops and other identified things
attached to realty as described in the section on goods to be
severed from realty (Section 2-107).
 

Goods

8

 

(2) Goods must both exist and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of

uture goo s or o any nterest t ere n operates as a contract to sell.

f

d

f

i

h

i

(3) There may be a sale of a part interest in existing identified goods.

9

Goods

9 Goods (4) An undivided share in an identified bulk of fungible goods is sufficiently identified

(4) An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller's interest in the bulk be sold to the buyer who then becomes an owner in common.

(5) "Lot" means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.

 

Goods

 

10

   

(6) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on A

t

(as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.

e a s ng e art c e

h

k

e mar et or

i

n use.

i

l

i

b

i

l

i

l

commerc a un t may

11

Classification of Goods

11 Classification of Goods a) Existing goods - Goods which either owned or possessed by the

a) Existing goods - Goods which either owned or possessed by the seller at the time of contract of sale.

i) Specific goods - Means goods identified and agreed upon at the time a contract of sale is made.

ii) Ascertained goods - When, out of a mass or a lot of unascertained goods, the quantity extracted is identified and earmarked for a given contract.

iii) Unascertained goods: Items in a seller's inventory from which a buyer's order will be picked (as and when it is received) but which are not yet identified and selected for sale.

Classification of Goods

12

Classification of Goods 12 b) Future be manufactured or produced or acquired by the seller after

b) Future

be

manufactured or produced or acquired by the seller after making of the contract of sale.

goods

Means

goods

to

-

c) Contingent goods - The goods the acquisition of which by the seller depends upon a contingent event which may or may no happen.

d) Sales Order/Invoice

Existing or future goods

13

Existing or future goods 13 The goods which form the subject of a contract of sale

The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by him after the making of the contract of sale, in this Act called future goods. There may be a contract for the sale of goods the acquisition of which by the seller depends on a contingency which may or may not happen. Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.

Effect of Perishing of Goods [Sec 7]

 

14

 

A contract for the sale of specific goods is void if the goods have perished at the time of contract.

Contract is void ab initio if

the goods perished

 

before the formation of contract.

 

In

agreement

to

sell

it

becomes

void

if

 

subsequently the goods have perished before the risk passes to the buyer.

15

The Price

15 The Price Price means the money consideration for a sale of goods. [Sec 2(10)] Price

Price means the money consideration for a sale of goods. [Sec

2(10)]

Price can be fixed in the following ways :

by the contract or terms of agreement, or may be determined by course of dealing between the parties. It may be the price prevailing on a particular day, or price to be fixed by a third party.

When price is not capable of being fixed by any of the above modes, the buyer shall pay the seller a reasonable price.

Conditions and Warranties

16

Conditions and Warranties 16 As a general rule, a person buying something, is duty bound to

As a general rule, a person buying something, is duty bound to see whether that thing suits his propose. This is called the doctrine of caveat emptor. When a seller gives an express assurance regarding the product, he is bound to honor that. Law presumes that product should meet certain minimum standards, breach of which has the same effect as the breach of express assurances or stipulations. Such legal presumptions are called implied conditions and warranties.

Conditions and Warranties

17

Conditions and Warranties 17 Implied Conditions A condition is a stipulation essential to the main purpose

Implied Conditions

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. [Sec

12(12)]

Implied Warranties

A warranty is a stipulation collateral to the main purpose of the contract, breach of which gives rise to a claim for damages, but not a right to reject the goods and treat the contract as repudiated. [Sec 12(3)]

Types of Implied Conditions

18

Types of Implied Conditions 18 a) Condition as to title b) Sale by description c) Sale

a) Condition as to title
b) Sale by description
c) Sale by Sample
d) Sale by description as well as sample
e) Condition as to fitness or quality
f) Condition as to Merchantability
g) Conditions implied by trade usage
h) Condition as to wholesomeness

i) Marketability

Caveat Emptor

19

Caveat Emptor 19 DEFINITION of ' Caveat Emptor ' A Latin phrase for "let the buyer

DEFINITION of 'Caveat Emptor' A Latin phrase for "let the buyer beware." The term is primarily used in

real property transactions. Essentially it proclaims that

y purchasing an item or service.

the bu er must

erform their due dili ence when

p

g

The seller is under no obligation to point out defects in the goods.

Caveat Emptor & Exceptions [Sec16]

20

Caveat Emptor & Exceptions [Sec16] 20 Where the seller makes a misrepresentation of fact; where the

Where the seller makes a misrepresentation of fact;

where the seller actively conceals a defect in the goods;

where goods are supplied by description and they do not corresponds with the description;

where the goods are supplied by description and they are not of merchantability quality;

when goods are sold by sample, and the goods do not correspond with the sample;

Caveat Emptor & Exceptions

21

Caveat Emptor & Exceptions 21 when the goods are sold by sample as well description, and

when the goods are sold by sample as well

description, and the bulk of the goods do not match either the sample or description, or both;

where the buyer relies upon the skill and judgment of the seller;

where trade usages or customs implies some condition or warranty and the seller deviates from that.

as

22

Implied Warranties

22 Implied Warranties Warranties as to Quiet Possession. Warranties as to free from encumbrance. Warranty as

Warranties as to Quiet Possession.

Warranties as to free from encumbrance.

Warranty as to disclosure of dangerous nature of the goods.

Warranty implied by customs.

Conditions reduced to Warranty.

Waiver by Buyer.

Acceptance of the goods by the buyer.

23

Passing of property

23 Passing of property Passing of property means passing of title and ownership of the goods

Passing of property means passing of title and ownership of the goods from seller to the buyer. Passing of property is independent of passing of possession. Property may pass to the buyer at any time after or at the time of execution of the contract but the possession in actual sense may never come with the buyer, if according to the contract the goods are transshipped to another destination in the same transit

24

Passing of property

24 Passing of property Passing of risk means passing of liability of loss and damage of

Passing of risk means passing of liability of loss and damage of goods from seller to the buyer, irrespective of the fact whether the title has yet passed or not.

Section 26 of the Act provides that the risk prima facia passes with the property.

It is a general rule which is subject to exceptions, which can be created through the agreement between the parties.

In a sale’s transaction where delivery of the goods is delayed due to the fault of either party the risk of loss and damage, which may occur due to that fault, is upon the faulting party.

25

Passing of Property

25 Passing of Property Transfer of property in the goods to the buyer is the main

Transfer of property in the goods to the buyer is the main object .

The significance of transfer of property is that risk travels with property.

After the formation of the contract but before the delivery of goods the questions regarding the rights and obligation are very crucial in the wake of risk of loss being associated with property.

Effect of Passing of Property

26

Effect of Passing of Property 26 1. Risk Travels with Property 2. Action against third parties

1. Risk Travels with Property

2. Action against third parties

3. Insolvency of seller or buyer

4.Seller's right for price

Rules regarding Passing of property

27

Rules regarding Passing of property 27 Goods must be specific or ascertained. Property passes when intended

Goods must be specific or ascertained. Property passes when intended to pass. Sale of Specific Goods

a) Passing of property at the time of contract.

b) Goods to be put in deliverable state.

c) Goods

to

be

weighed

measured

or

ascertaining their price.

d) Sale on approval.

for

 

Delivery to carrier

 

28

   
 

(1)

Where

in

pursuance

of

a contract

 

of

 

sale the seller is authorized or required to send

the goods to the buyer, delivery of the goods to a

for

the purpose of transmission to the buyer, is prima facie deemed to be a delivery of the goods to the buyer.

carrier whether named b

the bu er or not

y

,

,

y

Delivery to carrier

29

Delivery to carrier 29 (2) Unless otherwise authorized by the buyer, the seller must make such

(2)

Unless otherwise authorized by the buyer,

the seller must make such contract with the carrier 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 so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to the buyer, or may hold the seller responsible in damages.

30

31

Delivery to carrier

31 Delivery to carrier (3) Unless otherwise agreed, where goods are sent by the seller to

(3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable the buyer to insure them during their sea transit, and if the seller fails to do so, the goods shall be deemed to be at the seller’s risk during such sea transit.

32

Delivery to carrier

32 Delivery to carrier Transfer of personal property by one party (the bailor) in the possession,

Transfer of personal property by one party (the bailor) in the possession, but not ownership, of another party (the bailee) for a particular purpose. Such transfer is made under an express or implied contract (called bailment contract or contract of bailment) that the property will be redelivered to the bailor on completion of that purpose, provided the bailee has no lien on the goods (such as for non-payment of its charges). The bailee is under an obligation to take reasonable care of the property placed under its possession. Bailment contracts are a common occurrence in everyday life: giving clothes to a launderer, leaving car with an auto mechanic, handing over cash or other valuable to a bank, etc.

Reservation of right of disposal

33

Reservation of right of disposal 33 The seller may reserve the right of disposal until certain

The seller may reserve the right of disposal until certain conditions are fulfilled. For example –

Where buyer is to pay for the goods before delivery, Where by the BoL or R/R, the goods are deliverable to the order of the seller or his agent, Where the seller draws a BoE and send the same along with the BoL or R/R to secure buyer's acceptance or payment.

The property in the goods does not pass to the buyer until the conditions are fulfilled.

34

Transfer of Title

34 Transfer of Title The principle of Nemo dat quod non habet Exceptions - Transfer of

The principle of Nemo dat quod non habet Exceptions -

Transfer of title by Estoppel. Sale by Mercantile Agent. Sale by joint owner.

Sale

contract. Seller in possession after sale. Buyer in possession before sale. Resale by an Unpaid Seller.

by

in

possession

person

under

voidable

 

Other Exceptions

 

35

   
 

Finder of lost goods can convey a better title under certain circumstances.

Pawnee or pledgee of goods can transfer a better title under certain circumstances.

Sale by Official Receiver or Assignee in case of insolvency can transfer a better title in spite of not being owner of the goods.

A

holder

in

due

course

gets

better

title

of

a

 

negotiable instrument than the transferor.

 

Performance of Contract

36

Performance of Contract 36 It is the duty of the seller to deliver the goods and

It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them. [Sec 31] Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions. [Sec 32] Delivery may be made by doing anything that 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 to hold them on his behalf. [Sec

33]

 

Modes of Delivery

37

 

a)

Actual Delivery

 

b)

Constructive

Delivery:

a

delivery

not

accompanied by an actual transfer of possession of

g been intended by the parties and as sufficient in law (as where one sells to another and agrees to hold the

the

ro ert

p

delivered

et reco nized as havin

g

p

y

y

goods as agent for the buyer or where one delivers the documentary evidence of title to another).

38

Modes of Delivery

38 Modes of Delivery b) Constructive Delivery Constructive delivery may take place in either of the

b) Constructive Delivery

Constructive delivery may take place in either of the three ways -

i) seller in possession of goods after sale agrees to hold them on behalf of the buyer; or

ii) buyer is in possession of the goods and the seller agrees to his holding the goods as owner; or

 

Modes of Delivery

 

39

   
 

iii)

a

third

person

in

possession

of

goods

 

acknowledges to the buyer that he is holding them

on his behalf.

 
 

c)

Symbolic Delivery: The constructive conveyance of the subject matter of a gift or sale, when it is either inaccessible or cumbersome, through the offering of some substitute article that indicates the donative intent of the donor or seller and is accepted as the representative of the original item.

40

Part Delivery

40 Part Delivery A delivery of part of goods, in progress of the delivery of the

A delivery of part of goods, in progress of the delivery of the whole, has the same effect, as a

deliver

y

of the whole

;

but a delivery of part of the goods, with an intention of severing it from the whole does not operate as a delivery of the remainder. [Sec 34]

Duty of buyer to apply for delivery

41

Duty of buyer to apply for delivery 41 In the absence of any express contract, the

In the absence of any express contract, the seller of goods is not bound to deliver them unless the buyer applies for delivery. [Section 35] Even when the goods are to be acquired by the seller, and when they are acquired, and the seller notifies the buyer that the goods are in his possession, the buyer must apply for the delivery. The buyer has no cause of action against the seller if he does not apply for delivery, unless otherwise agreed.

42

Place of Delivery

42 Place of Delivery The place of delivery of goods may be specified in the contract

The place of delivery of goods may be specified in the contract itself. Where no place is specified in the contract, the foll. shall apply –

a) in case of sale, goods sold are to be delivered at the place at which they are at the time of sale, b)in case of an agreement to sale, goods are to be delivered at the place at which they are at the time of the agreement to sell, c) if at the time of agreement to sell the goods are not in existence, they are to be delivered at the place where they are manufactured or produced.

43

Other conditions

43 Other conditions Where the goods are in the possession of a third person, there is

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

Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller.

44

44 Compromise is the best and cheapest lawyer

Compromise is the best and cheapest lawyer

Delivery in wrong quantity [Sec 37]

45

Delivery in wrong quantity [Sec 37] 45 Short delivery Excess delivery Delivery of mixed goods Installment

Short delivery Excess delivery Delivery of mixed goods Installment deliveries

Delivery of wrong quantity or mixed goods

46

 
 

(1) Where the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered the buyer must pay for them at the contract rate.

(2)

Where

the

seller

delivers

to

the

buyer

a

quantity to sell,

of

goods

larger

than

the

seller

contracted

the buyer may accept the goods included in the contract and reject the rest, or the buyer may reject the whole. If the buyer accepts the whole of the goods so delivered

the buyer must pay for them at the contract rate.

 

Delivery of wrong quantity or mixed goods

47

Delivery of wrong quantity or mixed goods 47 to the buyer the goods the seller contracted

to

the buyer the goods the seller 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 the buyer may reject the whole.

or

(3)

Where

the

seller

delivers

reject

the

rest,

The provisions of this section are subject to any usage

of trade, special agreement, or course of dealing between the parties.

(4)

Delivery to Carrier/Wharfinger

48

Delivery to Carrier/Wharfinger 48 Delivery of the goods to a carrier or to a wharfinger (an

Delivery of the goods to a carrier or to a wharfinger (an owner or keeper of a wharf) is deemed to be a delivery to buyer.

The seller shall make such contract with the carrier or wharfinger on buyer's behalf as may be reasonable having regard to the nature of goods and other circumstances.

Delivery to Carrier/Wharfinger

49

Delivery to Carrier/Wharfinger 49 If the seller omit to do so, and the goods are lost

If the seller omit to do so, and the goods are lost or damaged, the buyer may decline the delivery to himself.

Where goods are sent by sea, the seller shall give notice to the buyer to enable him to insure them, if he fails to do so, the goods shall be deemed to be at his risk.

50

Duties of the buyer

50 Duties of the buyer Duty to accept the goods and pay for them in exchange

Duty to accept the goods and pay for them in exchange of possession. Duty to apply for delivery of goods. Duty to demand delivery at a reasonable hour. Duty to accept installment delivery and pay for it. Duty to take risk of deterioration in the course of transit. Duty to intimate the seller where he rejects the goods. Duty to take delivery. Duty to pay the price. Duty to pay damages for non-acceptance.

51

Unpaid Seller

51 Unpaid Seller The seller of goods is deemed to be an "unpaid" seller – when

The seller of goods is deemed to be an "unpaid" seller –

when the whole of tendered; or

when a bill of exchange or other negotiable instruments has been received as conditional payment,

or

the price has not been paid

the conditions has not been fulfilled by reason of the dishonor of the instrument or otherwise. [Sec 45(1)]

Rights of Unpaid Seller

52

Rights of Unpaid Seller 52 Notwithstanding that the property in the goods may have passed to

Notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller, has, by implication of law-

a) a lien on the goods for price while he is in possession of them;

b) in case of insolvency of the buyer a right of stopping the goods in transit; and

c) a right of resale. [Sec 45(1)]

53

Rights against goods

53 Rights against goods 1. Unpaid Seller's Lien [Sec 47] a) where the goods have been

1. Unpaid Seller's Lien [Sec 47]

a) where the goods have been sold without stipulation as to credit; or

b) where the goods have been sold on credit, but terms of credit has expired; or

c) where the buyer becomes insolvent.

The right of lien exists only for the price of the goods. Where part delivery of the goods has been made, he may exercise his right of lien on the remainder.

Termination of lien [Section 49]

54

Termination of lien [Section 49] 54 When he delivers the goods to a carrier or other

When he delivers the goods to a carrier or other bailee for transmission to the buyer without reserving the right of disposal;

when the buyer or his agent lawfully obtain possession of the goods; and

by waiver thereof.

Right of Stoppage in Transit

55

Right of Stoppage in Transit 55 Delivery to buyer Goods are deemed to be in course

Delivery to buyer Goods are deemed to be in course of transit from the time when they are delivered to a carrier or a bailee, until the buyer or his agent takes delivery.

The transit ends when the buyer or his agent takes delivery of the goods from the carrier before their arrival at the appointed destination.

Right of Stoppage in Transit

56

Right of Stoppage in Transit 56 Acknowledgement to buyer When the goods have arrived at their

Acknowledgement to buyer When the goods have arrived at their destination and the carrier acknowledges to the buyer or his agent that he is now holding the goods on his behalf, the transit is at the end.

57

Other conditionalities

57 Other conditionalities Rejection by buyer If the goods are rejected by the buyer, and the

Rejection by buyer

If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them, the transit is not at an end.

Wron ful refusal to deliver

g

Where the carrier wrongfully refuses to deliver the goods to the buyer or his agent, the transit is at an end.

Part delivery Where the goods have been delivered in part, the seller may stop the remainder of the goods, unless the part delivery shows an agreement to give up the possession of the whole.

When transit comes to an end

58

When transit comes to an end 58 When the buyer or his agent takes delivery of

When the buyer or his agent takes delivery of the goods from the carrier before their arrival at the destination.

When the goods have arrived at their destination and the carrier acknowledges to buyer or his agent .

Where the goods are delivered to a ship chartered by the buyer, the carrier is the agent of the buyer.

Where the carrier wrongfully refuses to deliver the goods to the buyer or his agent.

Right of resale [Sec 54]

59

Right of resale [Sec 54] 59 A contract of sale is not rescinded by mere exercise

A contract of sale is not rescinded by mere exercise of right of lien or stoppage in transit. Where the unpaid seller gives notice to the buyer of his intention to resell, he may resell the goods and recovers from the buyer damages for any loss. If no notice is given, the unpaid seller is not entitled to recover damages and the buyer shall be entitled to the profit. Where the seller reserves a right of resale and sells the goods,

the

prejudice to any claim by the seller.

original

contract

is

thereby

rescinded,

but

without

Seller's remedies against Buyer

60

Seller's remedies against Buyer 60 Suit for price. Damages for non-acceptance. Damages are assessed as follows:

Suit for price. Damages for non-acceptance. Damages are assessed as follows:

Where the goods have a ready market, the buyer has to pay the loss that the seller has sustained on reselling the goods.

Seller's remedies against Buyer

61

Seller's remedies against Buyer 61 If the seller does not resell the goods, the difference between

If the seller does not resell the goods, the difference between the contract and market price on the day of breach is the measure of damages. Where the goods are deliverable by installments the difference in prices is to be reckoned on the day that a particular installment was to be delivered.

,

Buyer's Remedies against Seller

62

Buyer's Remedies against Seller 62 1. Damages for non-delivery. 2. Remedy for breach of warranty. 3.

1. Damages for non-delivery.

2. Remedy for breach of warranty.

3. Specific Performance.

4. Anticipatory breach.

5. Recovery of interest.

Auction Sales [Sec 64]

63

Auction Sales [Sec 64] 63 An auction sale is complete when the auctioneer announces its completion

An auction sale is complete when the auctioneer announces its completion by the fall of the hammer. The bidder can withdraw before the acceptance of his bid and his security amount cannot be forfeited. The law does not prevent the seller from bidding provided he expressly reserve the right to bid.

Auction Sales [Sec 64]

64

Auction Sales [Sec 64] 64 If the seller appoint a puffers (persons who make bids in

If the seller appoint a puffers (persons who make bids in order to prompt bidding at higher prices), the sale is voidable at the option of the buyer. Auction subject to a reserve or upset price means a price below which the auctioneer will not sell.

Knock out Agreement

65

Knock out Agreement 65 An agreement among bidders not to bid against each other. It is

An agreement among bidders not to bid against each other.

It is a combination to prevent competition inter se.

An arrangement that only one of them will bid and dispose of anything so obtained privately among themselves.

Not illegal per se but if the intention is to defraud a third party then knock out is illegal.

 

Damping

 

66

 

An

unlawful

act

discouraging

the

intending

 

purchaser from bidding –

 

by pointing out defects in the goods in the auction sale; or

by taking away the intending purchaser from the place of auction by some other method.

Damping is illegal and the auctioneer is entitled to withdraw the goods from the auction.

67

Question

67 Question Sharif wanted to buy a gift for his wife Anum on her birthday. He

Sharif wanted to buy a gift for his wife Anum on her birthday. He visited XYZ Electronics, who deal in all sort of kitchen appliances. Sharif asked the salesman to show him a toaster. The salesman showed him several models and said the store did not have a policy of returns, but they seldom had any complaints. Sharif bought one model for Rs. 1650. After using it for one week, the toaster became overheated and got burst injuring Anum. State, giving reasons, the remedies available to Sharif in the above circumstances under the provisions of the Sale of Goods Act, 1930.

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