Use 'holder in due course' in a Sentence
THE SALE OF GOODS ACT 1930
1. Goods: Goods have been defined by Section 2, sub-section 7 of the Sale of Goods Act 1930 as “every kind of movable property, other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of land which are agreed to be served before sale or under a contract of sale.
Therefore Goods as defined by this act has the following characteristics:
1. Every movable property is goods.
2. Money and actionable claims are not considered as goods. Money is defined as the current coin of realm. But those coins which are no longer in circulation can become the subject matter of a contract of sale as an article of curiosity.
3. Goods include stocks and share although in English raw stocks and shares are not covered by the definition.
4. Goods also include growing crops and grass.
5. Anything which is attached to or forming part of the land (immovable property) can become goods if it is separated from the immovable property. Therefore, unless something is separate from immovable property, it cannot be called goods. But if separate valuation is put on immovable property on the one hand, and the fixtures and fittings on the other, it is taken as a proof that the intention of the parties was to separate the two. Similarly where two parties enter into an agreement under which one of them was to cut certain trees in the garden of the other party when their growth exceeded a certain specified limit, it was held that the portion of the trees cut are goods but not the trees themselves. In same way mineral beneath the surface of the earth are not goods but as soon as they are brought to the surface they become goods.
KINDS OF GOODS :
Broadly speaking goods are of the following three kinds.
(i) Existing goods : They are those goods which have actual existence at the time when the contract of sale is made. Existing goods are again of the following kinds:-
(a) Unascertained goods : They are those goods which are not actually identified by the seller but are described by description alone.
(b) Ascertained goods : Unascertained goods become ascertained when the seller decides which particular goods he is going to sell. This word is used as synonymous with specific goods but the difference between the two is that the ascertained goods may become identified only after a contract of sale has been made.
(c) Specific goods : They have been defined by Section 2, Sub-section 14 as those goods which are actually identified and agreed upon at the time a contract of sale is made.
Illustration : A person is the owner of a number of cars and enters into an agreement with the other to sell any of them. This is a contract for unascertained goods which would become ascertained when the seller decides as to which particular car he wants to sell and it will become a contract for specific goods when the car to be sold by the seller is actually pointed out to the buyer and he agrees to the same.
(ii) Future Goods : A person may enter into an agreement to seal something to the other which may have no actual existence but which he is to acquire, produce or manufacture in future. For example a cultivator may agree to sell the crop that he has sown.
(iii) Contingent goods : Are those the acquisition of which by the seller depends on a contingency which may or may not happen.
For example an importer in Bombay agrees to sell the consignment of goods which is on its way from America. This consignment is an instance of contingent goods because the acquisition of goods by the importer in Bombay depends upon a contingency whether it arrives safe at its destination or not. Therefore contingent goods are also a special class of future goods.
EFFECT OF PERISHING OF GOODS
According to sections 7 and 8 then word ‘perishing’ means not only physical destruction of the goods but it also covers :
(a) damage to goods so that the goods have ceased to exist in the commercial sense, i.e., their merchantable character as a such has been lost (although they are not physically destroyed) e.g., where cement is spoiled by water and becomes stone.
(b) Loss of goods by theft.
(c) where the goods have been lawfully requisitioned by the government.
It may also be mentioned that it is only the perishing of specific and ascertained goods that affects a contract of sale where, therefore, unascertained goods from the subject-matter of a contract of sale, their perishing does not affect the contract and the seller is bound to supply the goods from wherever he likes, otherwise be liable for breach of contract.
The effect of perishing of goods may be discussed under the following heads :
1. Perishing of goods at or before making of the contract this may again be divided into the following sub-heads:
(i) In case of perishing of the ‘whole’ of the goods where specific goods from the subject- matter of a contract of sale (both actual sale and agreement to sell) and they, without the knowledge of the seller, perish, at or before the time of contract, the contract is void. This provision is based either on the ground of mutual mistake as to a matter of fact essential to the agreement, or on the ground of impossibility of performance, both of which render an agreement void ab-initio.
(ii) In case of perishing of only ‘a part’ of the goods. Where in a contract for the sale of specific goods, only part of the goods are destroyed or damaged, the effect of perishing will depend on whether the contract is entire or divisible. If it is entire or indivisible and only part of the goods has perished, it is void. If the contract is divisible, it will not be void and the part available in good condition must be accepted by the buyer.
2. Perishing of goods before sale but after agreement to sell. Where there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is thereby avoided i.e., the contract of sale becomes void and both parties are excused from performance of the contract. This provision is based on the ground of supervening impossibility of performance which makes a contract void (section 8).
If only part of the goods agreed to be sold perish, the contract becomes void if it is indivisible, but if it is divisible then the parties are absolved from their obligations only to the extent of the perishing of the goods.
Further, if fault of either party causes the destruction of the goods, then the party in default is liable for non-delivery or to pay for the goods, though undelivered.
Effect of perishing of future goods. A present sale of future goods always operates as an agreement to sell. As such there arises a question as to whether Section applies to a contract of sale of future goods as well. The case of Howell Vs. Coupland provides the answer. In this case it has been held that future goods, if sufficiently identified, are treated to be as specifie goods, the destruction of which makes the contract void.
The facts of the case are as follows :
C agreed to sell to H 200 tons of potatoes to be grown on C’s land. C sowed sufficient land to grow the required quantity of potatoes, but without any facult on his part, disease attacked the crop and he could deliver only about 10 tons. The contract was held to have become void.
Document of Title to goods: A document of title to goods is one that is produced as a proof of the possession or control of goods when such goods are subjected to any transaction in a business. In a business deal such a document authorizes, either by endorsement, or delivery, its possessor to transfer or receive goods. It gives a right to the purchaser to receive the goods or to deal further with the goods.
Conditions of a document of title to the goods :
1. The document of title to the goods must be used in the ordinary course of business.
2. The unconditional undertaking to deliver the goods to the possessor of the document.
3. The unconditional entitlement to receive the goods to the possessor of the document.
CONTRACT OF SALE
Under Section 4 of the Sale of Goods Act, a contract of sale has been defined as “whereby the seller transfers or agrees to transfer the property in goods to the buyer for a period.
A contract of sale is of two kinds: A sale and an agreement to sell. According to Section 4 sub- section 3 a sale has been defined as where the seller transfers the property in the goods to the buyer at the time when a contract of sale is made and an agreement to sell has been defined as where the seller agrees to transfer the property in the goods to the buyer after the expiration of a certain period of time or the fulfillment of certain conditions.
For example a cash transaction in which goods are immediately purchased and sold is an instance of a sale while forward contracts on a stock exchange in which goods are agreed to be purchased on a future date ate instances of agreement to sell.
Therefore, according to section 4 sub-section 4, an agreement to sell becomes a sale after the expiration of a stipulated time or the fulfillment of the conditions laid down in a contract of sale.
A sale and an agreement to sell differ from each other on the following points.
(1) A sale is an executed contract while an agreement to sell is an executory contract.
(2) In the case of a sale there is an immediate transfer of property or ownership in the goods but in an agreement to sell such a transfer of property or ownership is to take place at a future date either on the expiration of the fixed time or the fulfilment of certain conditions.
These two points of distinction create different legal implications in the case of a sale and an agreement to sell.
(a) In the case of agreement to sell as the property in the goods has not passed to the buyer.
The purchaser has the right of recovering damages only from the seller of goods that are sold to a third party but in the case of a sale the seller can be held guilty of either conversion or misappropriation if the goods are sold by him to a third party because the property in the goods has passed to the buyer.
(b) In the case of an agreement to self if the buyer fails to pay the price of the goods the seller has only the right to recover damages from the buyer because buyer has yet not become the owner of the goods but in the case of a sale seller shall have the right to file a suit against the buyer for the price of the goods if the purchaser commits a breach of the contract, by refusing to purchase the goods because he has become the owner thereof.
(c) Where in the case of a sale the buyer becomes insolvent without the payment of price, the seller shall have to hand over the goods, if they are in his possession (except in the case of disputed ownership) to the official assignee of the buyer but in an agreement to sell he can refuse to deliver the goods till the payment of price because seller is still the owner of the goods.
(d) In an agreement to sell, if the seller becomes insolvent and the goods are still in his possession the buyer can not recover the goods but can file a petition against the seller in insolvency preceding for damages due to the breach of the contract but in the case of a sale the buyer can take the goods from the seller who has become insolvent (except in the case of reputed ownership).
Therefore it can be said that a sale creates a “right in rem” while an agreement to sell creates a “right in personam”.