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PERFORMANCE OF THE CONTRACT

Table of Contents

(Ss. 31 to 44)

1. Enumerate the rules as laid down in Sale of Goods Act, for the delivery of goods under contract of sale.

Q.2. Explain the provisions about ‘performance of the contract’ under the Sale of Goods Act.

Q.3. State the rules as to delivery of goods.

Q.4. Write detailed note on ‘cheque’ dishonor of cheque and its effect.

SHORT NOTES.

F.O.B. Contracts.
C.I.F. contracts.
Contracts involving sea-routes. Nov. 05.

SYNOPSIS

DUTY OF SELLER AND BUYER AS TO DELIVERY (S. 31):-
RULES AS TO DELIVERY OF GOODS: –
Payment and delivery are concurrent conditions (S. 32): –
Mode of Delivery (S. 33): –
Effect of part delivery (S. 34):-
Buyer to apply for delivery (S. 35): –
Rule as to place, time and expenses of delivery (S. 36): –
Place of delivery: –
Time of delivery: –
Expenses of delivery: –
Delivery of wrong quantity (S.37): –
Short delivery: –
Excess Delivery: –
Delivery of mixed goods: –
Installment Deliveries (S.38)
Delivery to carrier or Wharfinger (S. 39):-

CONTRACTS INVOLVING SEA ROUTE: –

F.O.B. Contracts: –
C.I.F. contracts: –

DUTY OF BUYER UNDER (I. F. CONTRACT): –

Ex ship Contracts: –

I. DUTY OF SELLER AND BUYER AS TO DELIVERY (S. 31)-

Performance of the contract is to be made by performing mutual rights and duties by the seller and buyer. Performance of the contract of goods is made by the delivery of goods by the seller to the buyer and acceptance thereof by the buyer. Therefore it is the seller’s duty to deliver the goods and of the buyer to accept and pay for them per the terms of the contract of sale (S. 31).

II. RULES AS TO DELIVERY OF GOODS: –

Following are the rules for making delivery[1] of goods.

1) Payment and delivery are concurrent conditions[2] (S. 32): –

Generally, the delivery of goods and payment of price thereto must be according to the terms of the contract between the parties. But in the absence of such terms in the contract, the delivery of goods and payment of price are concurrent conditions. In other words, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods.

2) Modes of Delivery (S. 33): –

The delivery of goods may be made by doing anything which the parties agree. Delivery may be either actual or symbolic, or constructive. A ‘symbolic’ delivery takes place where for example, the seller hands over to the buyer the key of the godown (where the goods are placed.) The instance of constructive delivery or delivery by attornment is when the goods are in the custody of a third person who, in accordance with the seller’s order, acknowledges holding them on the buyer’s behalf, and the buyer has assented to it.

3) Effect of part delivery (S. 34):-

Unless otherwise agreed, the buyer is entitled to the delivery of all goods agreed upon at a time. But the delivery of the part of the goods in the progress of the delivery of the whole has the same effect as if the whole goods have been passed. However, the delivery of the part of the goods, with the intention of severing it from the whole, does not operate as delivery of the remaining goods.

Illustration

A, a seller, sent 100 bags of rice to B, a buyer, out of the 200 bags agreed in the contract. The rest of the 100 bags are also to be sent immediately to A from the godown. If those 100 bags were lost in a fire in the godown itself. That is treated as a loss to B because the remaining bags were in progress of the delivery as a whole. But if the remaining 100 bags of rice were not ready in the delivery position, and the seller wanted to send them after some days, the goods were lost in the fire. There has been a loss of sellers so far as far as those last 100 bags were concerned.

4) Buyer to apply for delivery (S. 35): –

Apart from any express provision in the contract, it is the buyer’s duty to request delivery of the goods from the seller.

5) Rule as to place, time and expenses of delivery (S. 36): –

It is up to the parties to determine in their agreement the terms of time, place, and expenses for the delivery of the goods. But in the absence of such a contract, the law lays them down. Those rules are as follows –

a) Place of delivery: –

Apart from any express provision in the contract as to the place of delivery, goods sold are to be delivered at the place at which they are at the time of the sale. In the case of an agreement to sell, goods are to be delivered at the place at which they are at the time of the agreement to sell. If goods are not then in existence (delivery is to be made) at the place where they are manufactured or produced.

b) Time of delivery: –

Delivery is to be made within a reasonable time and hours, i.e. during office hours.

c) Expenses of delivery: –

The seller shall bear the expenses of and incidental to putting the goods into a deliverable state.

6) Delivery of the wrong quantity[3] (S. 37): –

The Section lays down the rules as to the delivery of the wrong quantity of goods as follows: –

a) Short delivery: –

Where the seller delivers to the buyer a number of goods less than he contracted to sell, the buyer may reject them. But if he accepts them, he shall pay for them.

b) Excess Delivery: –

Where the seller delivers a quantity larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest or reject the whole.

c) Delivery of mixed goods: –

Where the seller delivers the goods of different descriptions not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest or may reject the whole.

7) Deliveries in Installments[4] (S. 38):-

Unless otherwise agreed, the buyer of the goods is not bound to accept delivery of goods in instalments. But if the contract provides for an instalment delivery and the seller makes a defective delivery or makes any default in delivery or if the buyer makes any default in accepting the delivery, it becomes a question of fact to be decided, on a case basis, whether the whole contract to be repudiated or only a part thereof.

8) Delivery to carrier or Wharfinger (S. 39):-

Delivery of goods by the seller to a carrier or Wharfinger (Whether named by the buyer or not) is prima facie deemed to be delivery to the buyer. The seller also may make such a contract with the carrier (or Wharfinger) on behalf of the buyer, as is reasonable in the circumstances. If he fails to do so, and goods are lost or damaged in transit, the delivery to carriage or Wharfinger may be declined by the buyer as if delivery to himself.

When the goods are to be transmitted by sea route, the seller has (as a rule) to give notice to the buyer to insure the same, and if he fails to do so, he has to take the risk of the same during such sea transit.

Illustration

1) A in Mumbai orders 200 sacks of rice from B, a merchant in Karachi, and sends his own ship to Karachi for rice. The rice is put on board the ship and delivered to A.

2) X, in Mumbai, orders from Y, residing in Kashmir, 1000 woollen shawls to be sent to him by railway. Y takes Shawls to the railway station as directed by X and leaves them there without conforming to the rules of the Railway Company in order to render the Railway responsible for the safety of goods. As a result, the goods do not reach X. There has not been sufficient delivery to charge X for the price.

CONTRACTS INVOLVING SEA ROUTES: –

Where the goods have to be sent by sea transit, where insurance is usually provided, the seller should give the buyer notice that will enable him to insure the goods. If the seller fails to do so, the goods shall be at his risk during the sea transit.

Contracts which usually involve sea routes and which are known as ‘international sales’ are of three kinds, Vis:-

1) F.O.B. Contracts[5]: –

F.O.B. means “Free on Board”; in other words, it means the seller has to place the goods on board a ship at his own expense. He has only to bear the expenses of loading the goods. Therefore, the goods are at the buyer’s risk, and he is responsible for freight, insurance and subsequent expenses.

2) C.I.F. contracts[6]: –

C.I.F. indicates that the price includes cost, insurance, and freight. It is a type of contract which is more widely and frequently used in sea-borne commerce. The duties of the seller under C.I.F. contracts are –

a) To make out an invoice[7] for the goods sold.
b) To ship goods of the description contained in the contract at the port of shipment.
c) To procure a contract of affreightment[8].
d) To arrange for insurance.
e) Tender to the buyer, these shipping documents, namely, the invoice, the bill of loading, and the policy of insurance, delivery of which to the buyer is symbolic of delivery, it places goods at the buyer’s risk and entitling the seller to payment of their price.

DUTY OF BUYER UNDER C.I. F. CONTRACT: –

The buyer has to pay and receive the documents before the goods arrive. He has to pay the price as if he were buying the documents only because sometimes it is said that a C.I.F. contract is a sale of documents[9].

3. Ex-ship Contracts: –

Under an ‘Ex-ship’ contract, the seller must deliver the goods to the buyer at the destination port.

Sellers Duties: –

To deliver goods to the buyer at the port of destination.
To pay the freight or release the ship owner’s lien.
To furnish the buyer with an effective direction for the ship to deliver.

In the case of an Ex-ship contract, the property and risk in goods do not pass to the buyer until they are delivered at the port of destination.

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[1] Delivery (S. 2 (2)) means voluntary transfer of possession from one person to another.

[2] किंमत व हस्तांतरण हे एकाच वेळी असते. [ मूल्य और हस्तांतरण एक साथ हैं।]

[3] चुकीच्या मालाचे हस्तांतरण. [गलत माल का स्थानांतरण।]

[4] हप्त्या-हप्त्याने हस्तांतरण [किस्त हस्तांतरण]

[5] मोफत माल जहाजावर चढवून देणे. [मुफ़्त शिपिंग।]

[6] खर्च, विमा व भाडे. [व्यय, बीमा और किराया।]

[7] Invoice is the list of goods sent, with price thereof.

[8] Contract of affreightment means the contract with transport authority for the transportation of goods.

[9] In M. S. Co. Ltd. V. Corn Products Ltd. (1919) 1 K.B. 198.

Held– A C.I.F. contract does not mean that it is contract only for documents but also for goods.