Performance of Contract of Sale – Definition and Rules
You must have come across the word ‘Contract’, might have heard it from a movie, a series, or from your parents or teachers. So, what do I understand by the word Contract? Think of the answer by yourself before scrolling any further.
The Contract is the written agreement between two or more parties the breach of which may have consequences in the forms of penalties decided into a Contractual document. It is a legal agreement and has the effect of Law for its application. So while selling a product to the consumer there is either some form of written or verbal Contractual agreement. Business Law deals in detail with the meaning, scope, and uses of Contractual Law. In this particular article, we shall learn about the following concept of the Contract of Sales.
Table of Content
Introduction
What is the Performance of a Contract of Sale?
Definition of Delivery
Duty of the Buyer and the Seller
Payment and Delivery
Rules Regarding the Delivery of Goods
Solved examples
Key learnings from the topic
Frequently asked questions
What is the Performance of Contract of Sale?
The Sale of Goods Act 1930 states under Sec 31 that, “It is the duty of the seller to deliver the goods and the buyer to accept and pay for them, in accordance with the terms of the Contract of Sale.”
The performance of a Contract of Sale defines a simple transaction where the seller delivers the goods in exchange for a payment made by the buyer. Sections 31 to 40 of the Sale of Goods Act, 1930 state the rules and regulations that govern the Sale of goods and their delivery.
Let’s define delivery, buyer, seller and their duties.
Definition of Delivery
Under Section 2 (2) of the Sale of Goods Act, 1930, the delivery meaning has been stated as,
“voluntary transfer of possession of goods from one person to another.” The transfer of goods from one person to another will be considered a delivery under a Sale of goods act only when:
The transfer of goods is voluntary
The transfer is not done using theft, fraud or force
Mere possession of good does not constitute a valid delivery of goods
Duty of the Buyer and the Seller
The seller must deliver the goods as per the Contract of Sale. The buyer must accept the goods and make a payment as per the Contract of Sale.
Payment and Delivery are Concurrent
The payment and delivery of goods are concurrent conditions. The seller of the goods should be ready to make the delivery of goods in exchange for a payment and the buyer must be ready to make the payment for the delivery of goods unless agreed otherwise.
Rules Regarding the Delivery of Goods
Delivery
The delivery of goods can be done by putting the goods in the possession of the buyer or any other person authorized by the buyer to hold the goods on his behalf.
Partial Delivery of Goods
Partial delivery of goods made as progress towards full delivery has the same effect as full delivery, to pass the property in the goods. Partial delivery done with the intent of severing it from the whole does not constitute the delivery of the remaining goods.
Buyer Must Apply for Delivery
The buyer of the goods must apply to the seller for the delivery of goods unless otherwise stated in the terms, where terms of delivery meaning are the conditions mentioned in the Contract.
Place of Delivery
Both the buyer and the seller must agree to terms of delivery, express or implied, at the time of drawing up the Contract of Sale. If no such terms and conditions have been specified in the Contract:
Delivery of goods to be sold is done at the place where they are at the time of Sale
Delivery of goods to be sold is made at the place at which they are at the time of the agreement to sell. If the goods are not in existence at that time, they are delivered to the place of manufacture.
Time of Delivery
If the time of delivery of goods has not been specified in the Contract, it must be made within a reasonable time.
Goods in Possession of Third Party
If the goods have a third party at the time of Sale, then the third party must acknowledge to the buyer that the goods are being held on his behalf.
Time for Tender of Delivery
The demand for delivery must be made at a reasonable hour unless otherwise specified in the Contract.
Delivery Expenses
The expenses incurred for putting the goods in a deliverable state must be borne by the seller unless otherwise stated in the Contract.
Delivery of Wrong Quantity of Good
Goods for delivery means the goods sent by the seller at the time of delivery. If the seller sends a lesser or a larger quantity of the goods for delivery than what is specified in the Contract, the buyer has a right to reject the delivery of goods. If the buyer delivers a mix of goods where some parts are not as per the Contract, the buyer has the right to reject the goods that are not by the Contract.
Solved Example
1. John Agrees to Sell 100 kgs of Potatoes to Smith. At the Time of Delivery:
John Sends 60 kgs of Potatoes and 60 kgs of Tomatoes to Smith
John Sends 120 kg of Potatoes to Smith
2. Can Smith Refuse to Take the Delivery of the Goods?
Ans: In the above scenarios, since the delivery of goods is not according to the Contract, Smith can exercise the following options:
When the seller has sent a mix of goods:
The buyer can reject the complete order since it is not as per the Contract
The buyer can accept the delivery of 60 kgs of potatoes
When the seller has sent a larger quantity than specified in the Contract:
The buyer can reject the complete order since it is not as per the Contract
The buyer can accept the delivery of 60 kgs of potatoes
The buyer can accept the entire 120 kgs at the rate specified in the Contract
Key Learnings from the Chapter
Contract for the Sale of a good is the rule and regulations based on which the seller delivers a good in exchange for services
Delivery is the transfer of goods from one person to the other or from one place to another place
The seller must sell authentic, timely, and accurate delivery goods
The buyer must make the payment timely and not perform any act of fraud
Both the buyers and the sellers need to know their duties and rights.
FAQs on Performance of Contract of Sale
1. What is the difference between a Contract and an Agreement?
We often make the mistake of using the two-term interchangeably, however, there is a difference between the two. A Contract is a Legal and written Agreement between two or more parties for the implementation of a promise made. While the agreement is the informal promise made between two parties, it can be in the written or oral form, may or may not have legal backing for their implementation. The breach of which might not cause the initiation of legal action.
So, all the formal activities of a business take the form of a Contract.
2. When can a buyer deny the acceptance of the delivery of a good?
As per the Contract of Sale of delivery rule a buyer can deny the acceptance of the good in the following conditions -
If the seller delivers a lesser quantity of goods than the agreed amount
If the seller delivers a well more than the agreed quantity
If the delivered goods are got defected before getting to the buyer's place
If the seller charges more amount than the pre-agreed price
In any of the conditions, the buyer has a right to reject the acceptance of the goods.
3. What are the consequences of breach of a Contract under the Sale of goods act?
A Contract has legal backing and can be enforced by the rule of Law. So, if the Contract is breached by any of the parties, there is an option of approaching the consumer courts, the district courts and if the value of the transaction is high then the parties can also approach the high courts. There are remedies available for fraud cases, price distortion, late deliveries, misrepresentation, wrong products.
4. What are the rights of a seller under the performance of a Contract of Sales?
As per the act the seller has the following rights -
S/he can reserve the right of goods until payment is made
S/he will deliver the goods only when the buyer asks for it
S/he can make the delivery of goods in instalments if agreed by the buyers
S/he can stop the delivery of goods if the payment is due
S/he can resell the goods under certain conditions
S/he can sue the buyer for not making the payment of the goods
S/he can sue the buyer for the damage of the good if not received properly during delivery
These rights were designed to safeguard the rights of a seller.
5. What are the rights of an unpaid seller?
An unpaid seller is the one who has made the Sales but hasn't received the price for the products sold. They have rights against the goods as well as against the buyers. They are
Has the right of possession of the goods
Right of stoppage if the goods are in the transit
Right to resell the goods
Right to sue the buyer for the breach of the Contract
Right to seek interest if the payment is not made timely by the buyers.
6. When is the Buyer Deemed to Have Accepted the Delivery of Goods?
According to Section 42 of the sale of goods Act, the buyer is deemed to have accepted the delivery of goods when :
He informs the seller that he has accepted the goods
When he does something to the goods which are inconsistent with the ownership of the seller
When he retains the goods in his possession beyond a reasonable time, without informing the seller about his intention to reject the goods
7. What Happens When the Buyer Refuses the Delivery of Goods?
When the seller is willing to make the delivery of goods and asks the buyer to take the delivery but the buyer fails to do so within a reasonable time of receiving the delivery request then:
The buyer will bear any expenses for the reasonable care of the goods
The buyer will also bear any loss incurred due to his refusal to take delivery
