Thursday, July 13, 2006


Business Legislation Notes - Prof. Bijoy Kumar Dutta - Part 3

26st June, 2006 – Bijoy Kumar Dutta – Business Legislation


Sale of goods act defines a contract of sale of goods as a contract whereby the seller comes first or agrees to transfer the property of the goods to the buyer for a price.

Section A Sub Section 3 states that where in a contract of sell the property in the goods is transfer from the seller to the buyer the contract is called a sale, where the transfer of property in the goods is to take place at a future day or subject to same conditions here in after to be fulfilled the contract is called an agreement sale.


An agreement to sell is an executed contract where as sell is an executed contract. So contract of sell includes both sell & agreement to sell.


1. TWO PARTIES: A buyer & a seller.

2. GOODS: There must be same goods the property in which is or is to be transferred from the seller to the buyer. Property means the general property in the goods or in other words it means the right of ownership.

3. PRICE: The consideration for the contract of sale called price must be legal, tender, money of India. (Rupee)

4. TRANSFER OF PROPERTY: There must be transfer of general property distinguished from special property.

Goods means any kind of movable property except actionable claims & money & includes stocks & shares growing crops, grains & things attached to and forming part of the land which are agreed to be several before sale or under a contract of sale.

ACTIONABLE CLAIM – is a claim, which is actionable. It means a claim to a debt other than a debt secured by mortgage of immovable property or hypothecation or pledge of moveable property, which a civil court recognises, an affordable ground for relief.

Hipothecation – Money borrowed from tender but possession with owner.
Pledge – Property of goods is lying with tender.

1) Existing Goods
2) Future Goods
3) Contingent Goods

Existing goods are those goods which are already in existence & which are physically present in some persons ownership & possession. Existing goods are classified into
a) Specific Goods
b) Certain Goods

a) a) SPECIFIC GOODS - Specific Goods are those goods, which are clearly identified & recognised as separate things. Eg: a motorcar, a briefcase, a watch.
b) GENERIC GOODS – Generic Goods are those goods, which are indicated by description & are not separately identifiable. Eg: a seller agrees to sell one bag of rice to a buyer for 100 bags of rice available in his go down.

Future goods are those goods, which will be manufactures by the seller after the control of sell.
Eg: furniture, wood or raw material is converted into furniture.

There may be contract for sell of goods. The acquisition of which depends upon a contingency, which may or may not happen.
Eg: ‘A’ agrees to sell to ‘B’ a certain ring provided he is able to purchase it from its present owner.

DOCTORINE OF CAVET EMPTOR (let the buyer beware)

There means ordinarily a buyer must buy goods after satisfying himself of quality & fitness. If a buyer makes a bad choice, he cannot blame the seller & recover damages from him.


Higher Purchase Agreement is one in which a person takes delivery of goods, promising to pay the price by a certain no of installments & until full payment is made to pay higher charges for using the goods.The ownership in the goods is not transferred until the last payment is made.

In Installment Sale, the purchaser becomes the owner of specific goods immediately although the total price is to be paid in a no of installments or in other words, ownership is transferred at the payment of installments.


SALE: Where the property in the goods is transferred from seller to the buyer for a price.

BARTER: The transaction where goods are exchanged for goods.


Before a contract of sale is entered into, a seller often makes statements with reference to the goods, which influence the buyer to clinch the bargain.

Whether any statement made by the seller with reference to the good is a stipulation forming part of the contract or is a mere representation namely expression of opinion forming no part of the contract depends upon the construction of the contract.

Section 12 of the sale of goods act states that a stipulation or a term in a contract of sale w.r.t. goods may be a condition or a warranty.


Section 12 Sub Section 2

Condition is a stipulation essential to the main purpose of the contract in breach of which gives rise to a right to treat the contract as repudiated.
Eg: I have a saree shop. During Puja/Deewali, I know women will come to buy sarees. I make a condition with the saree manufacturer in Bangalore to send 2000 metres before 31stSeptember. If they send after the time (breach of contract), then I can ask for or sue for damages and contract termed as repudiated.


Section 12 Sub Section 3

It is also a stipulation, collateral to the main purpose of the contract. The breach of which gives rise to claim for damages but not a right to reject the goods & treat the contract as repudiated.

Section 13

Condition can be treated as a warranty by the buyer.


1) The buyer may waiver the condition or may elect to treat the breach of condition is a breach of warranty and accept performance ******** & sue for damages if he has suffered any loss.


Where a contract of sale is not sever able & the buyer has accepted the goods on part thereof, he cannot repudiate the contract but can only sue for damages. It is called Compulsory Waiver.


1) Condition as to the title of goods.
In a contract of sale, unless the circumstances are such as to show different intentions, there is an implied condition on the part of the seller that:
a) In the case of sale he has a right to sell the goods &
b) In the case of an agreement to sale he will have the right to sell the goods at the time when the property of the goods is to pass.

Rowland v/s Divar Case
The plaintiff bought a motorcar from the defendant & used it for several months. After sometime, it appeared that the defendant had no title to it & the plaintiff was compelled to surrender it to the owner.

2) Sale by Description
Where there is a contract of goods by description, there is an implied condition that the goods shall correspond to the description. This rule of law is summarized in a maxim “If you contract to sell peas, you cannot oblige a party to take beans”.


When the buyer expressly or by implication makes known to the seller, the particular purpose for which he needs the goods & depends upon the skill & judgement of the seller whose business is to supply goods of that description, then there is an implied condition that the goods shall be reasonably fit for the purpose.

Eg: Manchester Lines Limited v/s Rea Limited
Plaintiff who were ship when ordered from the defendants 500 tons of southwest coal for bunkering their steel ship. Defendants failed to supply the coal of the quality promised but delivered coal which was unsuitable for the plaintiff’s ship or steamer. Here the plaintiff had relied upon the sellers judgement & accordingly entitled to sue for damages.


1) In the case of sale by sample there is an implied condition that the bulk shall correspond to the sample in quality.
2) The buyer shall have the opportunity of company the goods with the sample.
3) The goods shall be free from any defect.
4) These implied conditions apply only to latent defects, which are not discoverable on an examination of the sample, but the seller is not responsible for patent defects. (ja chokhe dekha jay)


1) The buyer must get quiet possession.
2) The goods must be free from encumbrances.

28st June, 2006 – Bijoy Kumar Dutta – Business Legislation

Section 5
How is Contract of Sale made?
The contract of sale may be made in any of the following modes:-
1) Immediate delivery of goods
2) There may be immediate payment of price and the delivery is to be made at a future date.
3) There may be immediate delivery of goods & immediate payment
4) It may be agreed that the delivery / Payment or both due to be made even no of installments
5) Or may be agreed the delivery / payment or both to be made in future.


In sale, the property in the goods is transferred from the seller to the buyer for a price but in bailment there is only transfer of possession from the bailer to the bailey for a purpose.

Section 74 of the Sale of Goods Act defines earnest money as a security for fulfillment of agreement. Usually an understanding is made or a team in the agreement is incorporated to the effect that if a contract is broken by the buyer, the seller is to retain the earnest money as compensation, where as if the contract is fulfilled, the amount is credited to the purchase price pay but in the case of advance, the amount is not forfeited.


Qs) Who is an unpaid seller?
A - Seller of goods is deemed to be an unpaid seller when
a) Whole of the price of goods has not been paid or tendered.
b) When a bead of exchange or other negotiable instalments, which has a condition on the basis of which it was received, has not been fulfilled on by a reason of dishonour of instruments.

3 remedies against goods.
6 remedies against goods.

1) Seller’s lien – An unpaid seller of goods who is in possession of them is entitled to retain them until tender of payment has been made, when the goods have been sold.
a) Without any stipulation as to credit or
b) On credit, but time has expired or
c) When the buyer becomes insolvent.

2) Right of stoppage in transit – When the goods are in the course of transit but the buyer of goods become insolvent, then the seller can resume possession from the carrier.

3) Right of resale of the goods – The unpaid seller who has retained possession of the goods in exercise of his right of lien or who has resumed possession from the carrier upon the solvency of the buyer has the right of resale of the same goods.

1) Rights of unpaid seller against the buyer – When under a contract of sale the property in the goods has already passed to the buyer & the buyer refuses / neglects to pay the price of the goods according to the terms of the contract, the seller may file a suit for recovery of price of goods sold & delivered.

2) Sue for damages – When the buyer wrongfully refuses or neglects to accept & pay for the goods, the seller may sue for damages for the loss he had suffered.

3) Claim for special damages & interest – Seller may recover special damages / interest where by law special damages & interest may be recovered.


3rd July, 2006 – Bijoy Kumar Dutta – Business Legislation

Section 2
A definition of service e under section 2 means service of any description which us made available to potential users & includes what not the limited the provision of facilities in connection with banking, financing, insurance, transport, processing, entertainment,, amusement, or the purity of user other information but does not include the rendering of any service free of charge or under a contract of personal service.

Now medical service is included in deficiency of service as per decision of non Supreme Court.

What are the rights given to a consumer under CP Act 1986?
The consumer has been given the rights under the CP Act, which are as follows: -

1) RIGHT TO SAFETY - Right to be protected against the marketing, the goods & services that are hazardous to life & properties.

2) RIGHT TO BE INFORMAL – About the quality, quantity, policy, purity, standard/price of goods & services so as to protect the consumer against unfair trade practice.

3) RIGHT TO CHOOSE – To be assure wherever possible access to a variety of goods & services at competitive prices.

4) RIGHT TO BE HEARD – To be assured that the consumers interests will receive due considerations at appropriate forums for a **********.

5) RIGHT TO SEEK REDRESSAL against unfair trade practice or restriction trade practice of unscrupulous exploitation of consumers.


UNFAIR TRADE PRACTICE – Means a trade practice which is in purpose of providing a sale of new supply of any goods or for the provision of nay sale service, adopts any unfair record or unfair or deceptive practice including any of the following practices, namely: -

(i) False fully represents that the goods are of a particular standard, quantity grade composition style or model.
(ii) False fully represents any *******second hand , relocated, reconditioned or old goods as new gods.


It means a trade practice, which tends to bring about manipulation of price or its conditions of delivery or to affect flow of supplies in the market relating to goods or services. It is in such a manner so as to impose, all the consumers unjustified costs, all restrictions & shall include any trade practice, which requires a consumer to buy or hire or avail of any goods or services. As a condition precedent, to buy, hiring all availing of other goods or services.

Section 9

(a) Establishment of consumer disputes, redressal agencies consumer disputes redressal forum to be known as district forum in each district of the state.

(b) Consumer disputes redressal commission to be known or state commission in the state established by state government.

(c) National consumer disputes redressal commission known as national commission established by central government.


Composition & Jurisdiction of district forum, state commission & national commission.

Section 10
Each district forum shall consist of
a) A person who is or has been or is qualified to be a district judge, who shall be its President.
b) Two other members, one of who shall be a woman, who shall have the following qualifications namely: -
(i) Be not less than 35 years of age,
(ii) Possess a bachelors degree
(iii) The persons of ability, integrity & standing & hand adequate knowledge & experience of at least 10 years in dealing with problems relating to economics law, commence, accountancy, industry, public affairs or administration.


The convicted & sentenced to imprisonment for an offence, which involves moral terminology, insolvent, unsound mind, removal or discretion of service from the government.

Every appointment should be made by state government on the recommendation of selection consists of committee consisting of president of State Commission & Departmental Secretary. Every member shall hold office for a term of 5 years / 65 years.

Section 11

District Forum shall have jurisdiction to entertain complains where the value of the goods or services and the compensation if any, claim does not exceed 20 lacs.

Section 16

Each commission shall consist of
a) A person who is or have been a judge of a high court court, who shall be its president.
b) Not less than 2, one of who shall be a woman, who shall have the following qualification, same as District Forum.

Section 17
Section 17 have jurisdiction
(i) To entertain complains where the value of the goods or services & compensation if any
claim exceeds 20 lakhs but does not exceed 1 crore.
(ii)Appeals against the order of any District Forum.

b) Revisional Jurisdiction

Section 20

a) A person who is or has been a judge of Supreme Court, he shall be its President.
b) Not less than 4 of whom are must be a woman, who shall have the following qualification same as District Forum. (Sir’s favourite)

Section 21

Shall have jurisdiction to entertain
(i) To entertain complains, where the value of goods& or services & composition if any claim exceeds 1 crore.
(ii) Appeals against the order of any state commissions.

What are the RELIEFS a claimant can get?

1) Removal of direct pointed out by laboratory from the goods.
2) Replacement of the goods with new goods of similar description.
3) Return of price or charges paid.
4) Payment of compensation awarded.
5) Removal of defects of goods or deficiencies in service.
6) Discontinue unfair trade practice or destructive trade practice.
7) Not to offer hazardous goods for sell.
8) Withdraw hazardous goods.
a) Cease manufacturer of hazardous goods.
b) To pay some sum, if it is an opinion that loss or injury has been suffered by large no of consumers.
c) Issue corrective advertisement.

General Knowledge
Who is Ralph Nader?
He is an American Activist who proposed this above relief.

Who is Malubhai Shah?
He is an Indian Activist.

5th July, 2006 – Bijoy Kumar Dutta – Business Legislation


In simple words it is adjudication over disputes between parties by a judge who has been agreed upon by the parties to be the judge & decide upon the matter. Arbitration therefore means submission by two or more parties of their disputes to the judgement of a third person, called the arbitrator & who is to decide the controversy or dispute in a judicial manner.

Thus the usual feature of arbitration is the existence of a dispute between the parties and their agreement to refer it to the decision of a 3rd person with the intention that he shall act judiciously.

(Adjudication means bichar)

Dispute means the matter in dispute & not the contention over it. The exp***** dispute shall include dispute of law as well as fact. It may relate to an act of commission or omission.
Eg: You are holding a certificate to which a person is entitled to or refusing to raise the transfer of shares.

DISPUTES MUST BE OF CIVIL NATUREMatters of criminal nature cannot be referred to arbitration. Matters of moral and spiritual nature are not fir subjects of arbitration.

DOMESTIC ARBITRATION – Domestic Arbitration takes place in India when arbitation proceedings are subject matter of the contract & the merits of the disputes are governed by Indian Law or when the cause of action of the dispute arises wholly in India or where the party otherwise is subject to Indian Jurisdiction.

INTERNATIONAL ARBITRATION – It can take place either within India or outside in cases where there are the ingredients of foreign origin relating to the parties or the subject matter of the dispute.

In law, applicable the conduct of arbitration & merits of disputes may be Indian Law or foreign Law depending on the contract in this regard & the rules of the conflict of laws.

3. AD-HOC ARBITRATION – It is an arbitration agreed to and arranged by the parties themselves without reports to any institution. The proceedings are conducted & procedures are adopted by the arbitrator as per the agreement or with the concurrence of the parties.

4. INSTITUTIONAL ARBITRATION – Institutional Arbitration are conducted under the rules established by the arbitration organisation. Such rules are made to supplement in provision of the arbitration act in the matter of procedure.

5. STATUTORY ARBITRATION – Statutory Arbitration is conducted in accordance to tin provision of certain special acts, which specifically provide for arbitration in respect of disputes arising from matters covered by those acts.

Eg: - Electricity Act of 1910, Railways Act of 1889


Arbitration Agreement means an agreement by the parties to submit or all certain disputes which have arisen or which may arise in respect of a defined legal relationship, whether contractual or not.

Whether contractual or not means that the relation ship between the parties could be created by express contract or might exist dehors (means without) the contract.

DEFINED LEGAL RELATIONSHIP means no categories of a legal relationship.


1) It must be writing though it need not be contained in a formal document. An arbitration agreement is in writing if it is contained in a: -
a) The document signed by the parties.
b) An exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of agreement.
c) An exchange or statement of claims and defense in which the existence of the agreement is arranged by one party and denied by the other.

2) It must have all the essentials of a valid contact.
3) It may in the fall of an arbitration clause in a contract or in the fall of a separate entity.
4) There must be present or future difference in connection with some contemplated affair.
5) There must be the intention of the parties to settle such differences by some private tribunal.
6) The parties must agree in writing to be bound by the decision s of such tribunal.
7) The parties must be ad – item (both such have the same opinion).


The parties are free to agree to a procedure about the appointment of Arbitrator, in case of disagreement on the appointment of an arbitrator, in ad-hoc arbitration cases. Section 11 of the 1996 Act empowers the Chief Justice of High Court to appoint the Arbitrator or Arbitrator.

The Chief Justice is also empowered to designate any person or institution to take necessary steps for appointment of an Arbitrator.


What is an Arbitral Award?
An Award in an adjudication and its decision by the arbitrator upon the matter submitted to him. Section 30 of the Act recognises the liberty of the parties to come to a settlement.

The Arbitrator if satisfied about the genuineness and validity, of the settlement has to give an award in terms of settlement.


An Award shall be made in writing and shall be signed by the member/s of the Arbitral Tribunal. The award shall state the reasons upon which it is based unless the party is dispersed it with it, or unless the award is an arbitral award on agreed terms.

The award shall state its date and place of arbitration and after it is made and published, a signed copy of it shall be delivered to each party.

(solenama means compromise)


(i) Must conform to submission.
(ii) Arbitrator should conform to terms of agreement under which he is appointed.
(iii) Must be certain in operative particulars
Eg: There must be certainty as to the party who has to perform, who has to receive payments, the time and mode of payment, the amount payable.
(iv) Must be complete and final.

Exam 2006 Question

Under Section 34 of the 1996 Act an aggrieved party may apply to court within three months of the receipt of the award for settling aside of the award.

The grounds for settling aside of the award are as follows: -
a) Incapacity of the parties
b) Invalidity of the agreement
c) Want of proper notice about the appointment of an arbitrator or arbitral proceedings.
d) Award deal with a dispute not referred to arbitration.
e) Arbitrary tribunal was defective in composition.
f) Subject matter of dispute not being capable of settlement by arbitration under the law for a time being enforced.
g) Arbitral Award is in conflict with public policy of India.

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