Business law anwer 3

 

QUESTION 3 : “In a contract of Sale of Goods, “Risk prima facie passes with property”. Comment...

MARCH 20, 2021

QUESTION 3 : “In a contract of Sale of Goods, “Risk prima facie passes with property”. Comment. A sold goods to B on 15th February 2021 on 30 days credit. B does not pay on the scheduled date. A however extends the period of credit to 30th March 2021. What rights A has against B .Will the answer be different if A does not extend the period of credit. In the light of the above bring out the difference between Right of Lien and Right of Stoppage of goods in-transit.

Answer :

Section 26 of the Sale of Goods Act, 1930 states the goods are the owner’s risk if the property in them has not been transferred to the buyer. But if the property has been transferred to the buyer then the goods are buyer’s risk. This provision is applicable if no specific provision has been signed by the parties to the contract in their contract regarding this. This rule is applicable irrespective of the fact that delivery has been made or not.

It means that the risk is associated with ownership and not with mere possession of the property. To decide whether the risk has been passed or not, we first need to find whether the property in goods i.e. the ownership has passed or not.

The passing of risk means the transfer of the liability for damage or loss of the property from the seller of the immovable property to the buyer. The risk in the property prima facie passes with the property, but if the parties to the contract agree to pass the risk on the property at some other level of transaction, then that is also possible, depending upon the terms of their contract. It is also possible that that the title, risk, and possession of the property pass independent of each other from the seller to the buyer in a sale’s transaction.

There are two exceptions to the general law that the risk passes with the transfer of property in the goods. These are:

If the delivery has been delayed due to the fault of either party, then the liability of damage will lie on the party at fault. If the seller has failed to deliver the goods as agreed by the parties and the goods are damaged or lost due to that, then the seller will bear the cost. If the buyer has failed to take delivery of goods despite many reminders by the seller, then the buyer will bear.

Rights of Unpaid Seller Against Buyer

When the buyer of goods does not pay his dues to the seller, the seller becomes an unpaid seller. And now the seller has certain rights against the buyer. Such rights are the seller remedies against the breach of contract by the buyer. Such rights of the unpaid seller are additional to the rights against the goods he sold.

1] Suit for Price

Under the contract of sale if the property of the goods is already passed but he refuses to pay for the goods the seller becomes an unpaid seller. In such a case. the seller can sue the buyer for wrongfully refusing to pay him his due.

But say the sales contract says that the price will be paid at a later date irrespective of the delivery of goods,. And on such a day the if the buyer refuses to pay, the unpaid seller may sue for the price of these goods. The actual delivery of the goods is not of importance according to the law.

2] Suit for Damages for Non-Acceptance

If the buyer wrongfully refuses or neglects to accept and pay the unpaid seller, the seller can sue the buyer for damages caused due to his non-acceptance of goods. Since the buyer refused to buy the goods without any just cause, the seller may face certain damages.

The measure of such damages is decided by the Section 73 of the Indian Contract Act 1872, which deals with damages and penalties. Take for example the case of seller A. He agrees to sell to B 100 liters of milk for a decided price. On the day, B refuses to accept the goods for no justifiable reason. A is not able to find another buyer and the milk goes bad. In such a case, A can sue B for damages.

3] Repudiation of Contract before Due Date

If the buyer repudiates the contract before the delivery date of the goods the seller can still sue for damages. Such a contract is considered as a rescinded contract, and so the seller can sue for breach of contract. This is covered in the Indian Contract Act and is known as Anticipatory Breach of Contract.

4] Suit for Interest

If there is a specific agreement between the parties the seller can sue for the interest amount due to him from the buyer. This is when both parties have specifically agreed on the interest rate to be paid to seller from the date on which the payment becomes due. 

AND LAST DIFFRECE BETWEEN RIGHT OF LIEN AND STOPPAGE IN TRANSIT

Right of lien

1. The essence of right of lien is to retain possession.

2. Seller should be in possession of goods under lien

3. It can be exercised even when the buyer is not insolvent.

4. Right of stoppage in transit begins when the right of lien ends.

Right of stoppage in transit

1. The essence of right of stoppage in transit is right to regain possession.

2. in case of stoppage in transit;-

(a) Seller should have parted with the possession

(b) possession should be with a carrier and

(c) buyer was not acquired the possession.

3. It cannot be exercised even when the buyer is not insolvent.

4. The end of the right of lien is the starting point of stoppage in transit.