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Breach of Contract under Sale of Goods Act,1930

Before the introduction of Sale of Goods Act, 1930 laws governing the sales were sections 76 to 123 of the Indian Contract Act 1872. As the businesses around the country grew, the laws present at that time dealing with them were found inadequate to handle the new trends and challenges in front of them.

Thus, Sale of Goods Act 1930 was introduced with the objective of balancing the rights, duties, claims and expectations arising in the process of transferring of property from one person to another i.e of buyers and sellers.

The way of formation of a contract for a sale of goods, its prerequisite, conditions, etc all is mentioned in this Act. But what happens when after agreeing to buy/sell some goods buyer/seller refuses at the last moment or doesn’t deliver the good or doesn’t accept the goods or to put it simply doesn’t do the agreed task.

This is a situation of breach of contract. “A breach of contract occurs when a party thereto renounces his liability under it, or by his own act makes it impossible that he should perform his obligations under it or totally or partially fails to perform such obligation” (Associated Cinemaa of America, Inc v World Amusement Co, 1973)

Breach is of two type i.e Anticipatory Breach and Present Breach but irrespective of the type whenever the breach of contract occurs it violates the rights of the parties of contract. Therefore the Sale of Good Act, 1930 has the provisions to ensure the rights of buyers and sellers are protected at all cost. Thus, the aim of this paper is to study the Sales of Goods Act and identify various ways of through which breach is committed and the remedies which the buyers and sellers have in case a breach is committed against them so that they are aware of their rights and can take action so as to protect them.

Different ways of Breaching

A person is breaching a contract whenever he is violating any term stipulated in a contract.
Various ways to breach a contract of sale under Sale of Goods Act, 1930 are as follows:
  1. Non-Payment:

    When under a contract of sale the good has been passed to the buyer and the buyer neglects or refuses to pay for the goods according to the terms of contract he is said to be in breach of the contract.
     
  2. Violation of condition:

    According to section 12(2) a condition is a stipulation essential to the main purpose of the contract. In other words it’s a requisite upon which the whole contract is based on. For example if A informs a car salesman B that he wants to buy a car with mileage of 20Km/L then sale of any car with less mileage than that will not fulfill this condition and would be considered a breach of condition. Breach of condition gives right to treat contract as repudiated.
     
  3. Violation of warranty:

    According to section 12(3) a warranty is a stipulation collateral to the main purpose of the contract. Any condition which serves as collateral to the main purpose of contract is a warranty. For example A wants to buy mobile with 4000mAh battery. This is a condition, whereas smooth functioning of mobile is a warranty. Breach of warranty gives right to claim damages but does not gives the right to treat contract as repudiated.
    • It is to be noted that according to section 13 the buyer may waive his right and chose to treat a breach of condition as breach of warranty and claim not repudiation but only damages.
       
  4. Installment Deliveries:

    In case the goods are to be delivered in installments and to be paid separately for each installments, if the seller makes any defective delivery regarding one or more installments or the buyer refuses to pay for one or more requirements, such a case is of breach of contract. However it would depend on terms of contract and conditions of the case to whether to treat the breach as repudiation of whole contract or the breach is just to give rise to claim for compensation and not repudiation of whole contract.
     
  5. Non acceptance of good:

    When a buyer neglects or refuses to accept the delivery of goods, he is in breach of contract.
     
  6. Non delivery of good:

    When a seller after entering into a contract of sale refuses to deliver the goods to the seller, he is in breach of contract.
    • It is to be noted that the seller is not breaching the contract if he is exercising his right of lien/stoppage in transit with respect of non-payment.

Remedies available to Sellers against Buyers

The following are the remedies under Sale of Goods Act, 1930 which are available to the sellers in case of breach made by the buyer:
  1. Suit for the price:
    According to the section 55 when under a contract the good has passed to the buyer after which he refuses to pay for the goods; seller has the right to sue him for the price of the goods.

    Moreover, the section also makes the payment of the good on a certain date necessary irrespective of whether the buyer has received the delivery of the goods or note provided there exist a condition for the same in the contract. If under such a contract of sale buyer refuses to pay for the good on the stipulated date irrespective of whether he received the good or not; buyer can sue him for the price of the goods.
     
  2. Recovery of losses in case of re-sale of good while exercising the right of lien/stoppage of good in transit:
    According to section 54 in case where the goods are of perishable nature or the unpaid seller has exercised his right of lien or stoppage in transit after giving notice to the buyer of his intention to sell the good if the buyer doesn’t pay him within a reasonable time and after selling it to a third party in a lower price can sue the original buyer for the losses he sustained due to his (original buyer’s) breach.
     
  3. Damages for non-acceptance:
    According to section 56 when under a contract of sale buyer has sold a good to a seller and afterwards the buyer is wrongfully refuses to accept and pay for the goods; seller can sue the buyer for non-acceptance.

In the case of Suresh Kumar Rajendra Kumar v K Assan Koya & sons the plaintiff sold the goods to the seller who afterwards rejected to accept and pay for the goods. Plaintiff in orderly course of business sold the goods urgently at a lower price.

The court held that the seller had to pay damages to the amount of difference between the price the rice was supposd to be sold and the price it was finally sold. (Suresh Kumar Rajendra Kumar v K Assan Koya & sons , 1989) This case is the perfect example of the seller utilizing the remedies available to him under section 54 and 56.

Remedies available to Buyers against Sellers

The following are the remedies under Sale of Goods Act, 1930 which are available to the buyers in case of breach made by the sellers:
  1. Damages for non-delivery:

    According to section 57 if a seller under a contract of sale has sold a good and afterwards wrongfully refuses to deliver the goods to the buyer; buyer can sue the seller for damages for non-delivery of goods.

    However it is to be noted that a reasonable time must be given to the seller for making the delivery of the good. Moreover, if the buyer has not informed the time period in which it is to be delivered by giving notice under section 55 of the Indian Contracts Act, seller cannot sue for damages.
     
  2. Damages for breach of warranty:

    According to section 59; in case where there is breach of warranty by the seller or the buyer has considered to treat breach of condition as breach of warranty under section 13, the buyer does not has the right to repudiate the contract.

    The buyer in such a case has only two options. First is to set up against the seller the breach of warranty in diminution or extinction of the price. Second option available is to sue the seller for damages for breach of warranty.

    However it is to be noted that by choosing the first option a buyer does not lose the right to sue the seller for breach of warranty if in case he suffers further damage.
     
  3. Specific Performances:

    The section 58 states that subject to the provision of Specific Relief Act 1877, if the contract is breached, the Court may, on the request of the plaintiff (buyer) direct the seller to perform the contract in a particular and specified manner. This decree passed by the court may or may not carry terms and conditions with respect of price, mode of delivery, etc.
Moreover, this right is only available to the buyer. This section provides no solution to the seller. Furthermore this remedy is available only on request of the buyer.

Assessing the Amount of Damages to be paid

Whenever a breach of contract is committed damages are awarded to the suffering party because his/her right was violated and he/she suffered losses because of it. But what should be the amount of damages to be paid in case of breach of contract of sale under Sale of Goods, Act. The damages to be paid are calculated on the basis of the principles of section 73 & 74 of the Indian Contract Act.

According to section 73 of Indian Contract Act, if a person breaks a contract, the party which suffers the loss due to the breach is entitled to receive, from the party who breaks the contract, compensation for the loss or damage caused to him which naturally arose in the course of business from such a breach or the loss which the party knew would arise if the contract is to be breached.

However, this compensation should not be awarded for any loss which is too remote or indirect.
Thus whenever there is a breach the following two things are found out regarding the damages to be paid:
  1. Remoteness of Damages:

    First of all it is decided for what losses the breacher is responsible i.e whether the loss suffered by the party is too remote or comes within the purview of reasonable remoteness.

    This is an important factor because sometimes there exists situations where one breach causes a series of events which causes more breaches which sometimes are too remote for a reasonable person to foresee or know. That is why remoteness of damages is fixed to pay damages.
     
  2. Measure of Damages:

    The amount is calculated next. The amount of damages is equal to loss or caused to the party which naturally arose in the course of business from such a breach or the loss which the party knew would arise if the contract is to be breached.

Remedies available to both Buyers & Sellers

  1. Suite for Repudiation of contract before due date/anticipatory breach:

    According to section 60, in case where either buyer or seller repudiates the contract before the due date or in other words refuses before the due date to perform the terms of the contract on the due date, the other party has two options. First, wait for the due date and after the non performance by the other party sue him for damages. Second, sue immediately without waiting for the actual non performance of the terms of the contract.

    In Hochster v De La Tour the services of the plaintiff was to start from 1st June. But the defendant informed on 11th May that he does not require the services anymore. The court held that the plaintiff is entitled to sue for damages before 1st June. (Hochster v De La Tour, 1853)
     
  2. Interest by way of damages and Special Damages:

    The section 61 vests the right to recover interest or special damages where law interest or special damages may be recoverable or in the case where recovery of the money paid where the consideration for the payment of it has failed has to be made.

    The court may award interest at the rate which it deems reasonable and fit to the seller for the amount of price from the date of the tender of the goods or from the date on which the price was payable or to the buyer for the refund of price in case of breach of contract from the date the payment was made.

Conclusion

It can be concluded that non performance of the duties by buyer or seller as per the terms of contracts regarding the sale of any good results in breach of contract which will in turn violate the rights of buyers or sellers.

To protect these rights Sale of Goods Act provides for several remedies which can be used by buyers and sellers to compensate their losses by claiming the loss or damage caused by the other party by the way of breach.

These remedies which are provided by the Sales of Goods Act, are given to both buyers and sellers. However, some remedies exist only for buyer, some only for seller and some to both buyers and sellers.

Moreover by using the remedies buyers and sellers can claim damages from the breacher of the contract. These damages are calculated on the basis of provisions of Indian Contract Act i.e reasonable foreseeability and reasonable measure of damage.

References:
  1. Associated Cinemaa of America, Inc v World Amusement Co (Minnesota Supreme Court 1973).
  2. Hochster v De La Tour, E&B 678 (1853).
  3. Suresh Kumar Rajendra Kumar v K Assan Koya & sons , AIR 1990 Ker 20 (High Court of Kerela 1989).
  4. Singh, A., 2017. Indian Contract & Specific Relief. Lucknow: Eastern Book Company
  5. Kumar, R. (2019). Breach of Contract in Sales of Goods Act, 1930. Retrieved 27 September 2020, from https://indianlegalsolution.com/breach-of-contract-in-sales-of-goods-act1930/#:~:text=Suits%20for%20the%20price%2D%20Section,the%20price%20of%20the%20goods.
  6. Indian Contracts Act, 1872
  7. Sales of Goods Act, 1930

    Award Winning Article Is Written By: Mr.Jai Mishra

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    Authentication No: NV31732984746-2-1120

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