Indian Sale of Goods Act, 1930 governs contracts related to the sale of goods in India. It defines the rights and obligations of buyers and sellers, establishing a legal framework for resolving disputes and protecting commercial transactions. Two significant provisions under this Act are the right of resale available to the unpaid seller and the remedy of damages for non-acceptance available to the seller when a buyer refuses to accept goods. These rights aim to balance the interests of both parties and maintain the integrity of trade and commerce.
Right of Resale under the Indian Sale of Goods Act, 1930
Definition and Scope
The right of resale is a statutory right conferred upon an unpaid seller under Section 54 of the Indian Sale of Goods Act, 1930. It allows the unpaid seller to resell the goods when the buyer defaults in payment or refuses to accept delivery of the goods. This right ensures that the seller is not left without a remedy when the buyer breaches the contract.
Legal Provision – Section 54
Section 54 of the Sale of Goods Act, 1930 states:
“(1) Subject to the provisions of this Act and of any law for the time being in force, an unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price.
(2) Where the property in goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, the unpaid seller has a right of resale as limited by this section.
(3) Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to resell the goods and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may resell the goods and recover the difference between the contract price and the resale price.”
Conditions for Exercising Right of Resale
The right of resale arises only in specific circumstances:
- The seller must be unpaid – The seller must not have received the payment or a valid tender of payment.
- Buyer’s refusal to pay or accept delivery – The buyer must have failed to fulfill their obligation under the contract.
- Right to lien – The seller should have a valid right to retain possession of the goods until payment is made.
- Notice of resale – The seller is required to give the buyer reasonable notice before reselling the goods unless the goods are perishable.
Legal Effect of Resale
If the unpaid seller resells the goods, the following legal consequences arise:
- If the resale is conducted properly, the original contract is considered terminated.
- If the resale fetches a price lower than the contract price, the unpaid seller can claim the shortfall as damages from the original buyer.
- If the resale fetches a higher price, the unpaid seller is not liable to refund the excess to the original buyer.
Case Law on Right of Resale
In Ram Saran Das Raja Ram & Anr. v. Lala Ram Chander (Delhi HC, 5 May 1967), the plaintiff (Ram Chander) sued the defendants for breach of contract regarding the sale of mustard oil. The plaintiff had dispatched mustard oil per the contract, but the defendants refused to accept delivery and honour the payment through the bank. The plaintiff resold the oil at a loss and claimed damages.
The court held that a valid contract existed, the plaintiff had a right to resell the goods after giving notice under Section 54 of the Sale of Goods Act, 1930, and the resale price was admissible for calculating damages. The court ruled in favour of the plaintiff, awarding recovery of the loss and other incidental expenses.
Damages for Non-Acceptance under Indian Sale of Goods Act, 1930
Definition and Scope
Under the Sale of Goods Act, the seller has the right to claim damages when the buyer wrongfully refuses to accept delivery of the goods. This right is based on the principle that a party who suffers loss due to the breach of contract by the other party is entitled to be compensated.
Legal Provision – Section 56
Section 56 of the Sale of Goods Act, 1930 states:
“Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance.”
Conditions for Claiming Damages for Non-Acceptance
For the seller to successfully claim damages for non-acceptance, the following conditions must be satisfied:
- There must be a valid contract of sale.
- The goods must have been ready for delivery as per the contract.
- The buyer must have refused or neglected to accept the goods.
- The seller must have suffered actual loss due to the non-acceptance.
Assessment of Damages
The measure of damages is based on the principles laid down in Section 73 of the Indian Contract Act, 1872, which states that the injured party is entitled to compensation for any loss or damage arising naturally from the breach or which the parties contemplated at the time of contract formation.
The damages are calculated based on the difference between:
- Contract price and market price at the time and place of delivery.
- If there is no market price, the court may determine the loss based on reasonable commercial practices.
Case Law on Damages for Non-Acceptance
In Karsandas H. Thacker v. The Saran Engineering Co. Ltd. (SC, 14 February 1965), the appellant sued for damages for breach of contract after the respondent failed to deliver 200 tons of scrap iron. The appellant claimed damages based on the loss suffered due to his subsequent contract with Export Corporation for the resale of scrap iron. The Supreme Court held that the respondent was not liable for such damages since it was not informed at the time of the contract that the scrap iron was intended for export. Under Section 73 of the Contract Act, damages for breach are limited to losses that naturally arise from the breach or are foreseeable by both parties at the time of the contract. The appeal was dismissed with costs.
Conclusion
The right of resale and the right to claim damages for non-acceptance under the Indian Sale of Goods Act, 1930 are essential remedies available to an unpaid seller. While the right of resale protects the seller’s interest by allowing recovery through a fresh sale, the right to claim damages ensures that the seller is compensated for the financial loss caused by the buyer’s breach. Judicial pronouncements have reinforced the importance of these remedies in maintaining the balance of rights between buyers and sellers in commercial transactions. A clear understanding of these provisions helps protect the interests of sellers and ensures the smooth functioning of trade and commerce under Indian law.
References
[1] Sale of Goods Act, 1930
[2] Indian Contract Act, 1872
[3] Ram Saran Das Raja Ram & Anr. v. Lala Ram Chander, AIR 1968 Delhi 233
[4] Karsandas H. Thacker v. Saran Engineering Co. Ltd. (1965) AIR SC 1981
