(..6 f..)
PERFORMANCE OF THE CONTRACT
(Ss. 31 to 44)
Q. 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.
1. F.O.B. Contracts.
2. C.I.F. contracts.
3. Contracts involving sea-routes. Nov. 05.
SYNOPSIS
Comprehensive Legal Analysis: Performance of the Contract and Rules of Delivery (Sections 31–44)
Part I: Base Core Obligations (Sections 31 & 32)
1. Reciprocal Duties (Section 31)
2. Concurrent Conditions (Section 32)
Part II: Codified Rules Governing Delivery of Goods
1. Modes of Delivery (Section 33)
buyer.
aa. Actual Delivery:
b. Symbolic Delivery:
c. Constructive Delivery (Delivery by Attornment):
2. Effect of Part Delivery (Section 34)
3. Buyer's Obligation to Apply for Delivery (Section 35)
4. Place, Time, and Expenses of Delivery (Section 36)
a. Place of Delivery (Section 36(1)):
b. Time of Delivery (Section 36(2)):
c. Expenses of Delivery (Section 36(5)):
Part III: Delivery of a Wrong Quantity (Section 37)
1. Short Delivery (Section 37(1)):
2. Excess Delivery (Section 37(2)):
3. Mixed Goods (Section 37(3)):
Part IV: Installment and Carrier Deliveries (Sections 38 & 39)
1. Installment Deliveries (Section 38)
2. Delivery to a Carrier or Wharfinger (Section 39)
a. Duty to Contract Reasonably (Section 39(2)):
b. Maritime Transit Caveat (Section 39(3)):
Part V: Maritime Sales and International Trade Formats
1. F.O.B. Contracts (Free on Board)
2. C.I.F. Contracts (Cost, Insurance, Freight)
3. Ex-Ship Contract
a. Seller's Duties:
b. Passing of Risk:
Part VI: Comparative Reference Matrix for Maritime Contracts
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Comprehensive Legal Analysis: Performance of the Contract and Rules of Delivery (Sections 31–44)
The Sale of Goods Act, 1930 governs the execution of commercial transactions through Chapter IV (Sections 31 to 44), which outlines the rules for Performance of the Contract. Performance requires the practical fulfillment of reciprocal rights and duties by both the seller and the buyer.
Under mercantile jurisprudence, a contract is performed when the seller transfers physical or symbolic possession of the commodities and the buyer accepts the goods and remits the agreed monetary payment.
Part I: Base Core Obligations (Sections 31 & 32)
1. Reciprocal Duties (Section 31)
Section 31 establishes the concurrent statutory duties of the parties:
"It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale."
2. Concurrent Conditions (Section 32)
Unless the contracting parties explicitly specify deferred or credit terms within their text, delivery of goods and payment of the price are concurrent conditions.
a. The seller must be entirely ready and willing to surrender physical possession of the merchandise to the buyer in exchange for the price.
b. The buyer must be concurrently ready and willing to pay the complete monetary price in exchange for taking possession.
Part II: Codified Rules Governing Delivery of Goods
The statute establishes specific rules to handle performance variables when agreements do not explicitly address them:
1. Modes of Delivery (Section 33)
Delivery is defined as any voluntary transfer of possession from one person to another. Section 33 recognizes three distinct operational modes: the buyer.
aa. Actual Delivery: The physical handover of tangible property directly into the custody of the buyer or their authorized agent.
b. Symbolic Delivery: An act that assigns constructive control over the goods when actual physical transfer is difficult or delayed.
Example: Handing over the keys to a secure locked godown or warehouse where the heavy cargo is stored.
c. Constructive Delivery (Delivery by Attornment): A transaction that alters legal possession without changing physical custody. This occurs when goods are in the custody of an independent third person (such as a warehouseman) who acknowledges, on the seller's order, that they now hold those commodities on behalf of the buyer.
2. Effect of Part Delivery (Section 34)
Unless otherwise agreed, a buyer is entitled to receive the complete volume of goods simultaneously. However, Section 34 distinguishes the legal effect of part delivery based on intent:
a. In Progress of the Whole: If a delivery of part of the goods is executed with the intent to complete the full transfer, the property and risk pass to the buyer for the portion delivered.
b. With Intention to Sever: If a portion of the goods is delivered with the clear intention of severing it from the remainder, the partial transfer does not operate as a delivery of the remaining goods.
Statutory Illustration: A contract to sell 200 bags of rice to B. The seller delivers 100 bags, with the remaining 100 bags loaded and ready in the warehouse for immediate transport. If an accidental fire destroys the warehouse before the second batch leaves, the loss falls on the buyer, B, because the partial delivery was executed in progress of transferring the whole lot. Conversely, if the remaining 100 bags were not yet ready or processed, and the seller intended to deliver them days later, a fire destroying the warehouse shifts the loss back to the seller for the undelivered portion.
3. Buyer's Obligation to Apply for Delivery (Section 35)
In the absence of an express contract clause to the contrary, the seller is under no obligation to deliver the goods until the buyer applies for delivery. The buyer must take the initial step of requesting performance.
4. Place, Time, and Expenses of Delivery (Section 36)
a. Place of Delivery (Section 36(1)): Goods must be delivered at the place where they are located at the time of the sale. For an agreement to sell, they must be delivered where they are located at the time of the agreement. If the items do not yet exist, they must be delivered at the place where they are manufactured or produced.
b. Time of Delivery (Section 36(2)): Where the seller is bound to send the goods but no timeframe is fixed, they must be delivered within a reasonable time and during reasonable business hours.
c. Expenses of Delivery (Section 36(5)): The seller bears all expenses required to bring the goods into a deliverable state.
Part III: Delivery of a Wrong Quantity (Section 37)
If a seller delivers a volume that does not match the strict specifications of the contract, Section 37 provides the buyer with specific remedies: │ ───────────────────┘
1. Short Delivery (Section 37(1)): If the seller delivers less than the contracted amount, the buyer can reject the entire delivery. If the buyer accepts the short delivery, they must pay for them at the contract rate.
2. Excess Delivery (Section 37(2)): If the seller delivers more than the contracted amount, the buyer can accept the contracted quantity and reject the rest, or reject the entire shipment.
3. Mixed Goods (Section 37(3)): If the seller delivers the contracted goods mixed with items of a different description not included in the agreement, the buyer can accept the conforming goods and reject the rest, or reject the entire delivery.
Part IV: Installment and Carrier Deliveries (Sections 38 & 39)
1. Installment Deliveries (Section 38)
Unless the parties explicitly agree to installment terms, the buyer is not bound to accept delivery in installments. If installment deliveries are authorized and the seller executes a defective delivery or the buyer defaults on an installment, whether the entire contract can be treated as repudiated depends on the terms of the contract and the specific circumstances of the case.
2. Delivery to a Carrier or Wharfinger (Section 39)
Delivery of goods by the seller to an independent carrier or wharfinger for transmission to the buyer functions prima facie as a delivery to the buyer.
a. Duty to Contract Reasonably (Section 39(2)): The seller must enter into a reasonable contract with the carrier on behalf of the buyer. If they fail to do so and the goods are damaged in transit, the buyer may refuse to treat the delivery to the carrier as delivery to themselves.
b. Maritime Transit Caveat (Section 39(3)): If goods are sent by a sea route, the seller must give the buyer sufficient notice to enable them to insure the shipment. If the seller fails to give notice, the goods remain at the seller's risk during transit.
Part V: Maritime Sales and International Trade Formats
In long-distance maritime commerce, the allocation of risk and delivery expenses is standardized across three primary contract formats:
1. F.O.B. Contracts (Free on Board)
Under an F.O.B. Contract, the seller fulfills their delivery obligation once they place the goods safely on board the vessel designated by the buyer at the port of shipment.
a. Seller's Expense: The seller pays all loading and port-clearance expenses.
b. Buyer's Risk: The goods pass to the buyer's risk once they cross the ship's rail. The buyer is responsible for maritime freight, transit insurance, and all subsequent transport expenses.
2. C.I.F. Contracts (Cost, Insurance, Freight)
A C.I.F. Contract is a widely used format where the stated price includes the cost of the goods, the marine transit insurance, and the freight charges to the destination port.
Seller's Duties under C.I.F.:
a. Prepare a commercial invoice for the sold commodities.
b. Ship goods matching the contract description at the port of shipment.
c. Secure a valid contract of carriage (affreightment).
d. Arrange for marine insurance coverage.
e. Tender the shipping documents—the invoice, the Bill of Lading, and the insurance policy—directly to the buyer. This transfer acts as symbolic delivery, placing the goods at the buyer's risk and entitling the seller to payment.
Judicial Distinction: The buyer must pay the price upon receiving the shipping documents, even before the physical goods arrive at port. For this reason, courts often describe a C.I.F. contract as a "sale of documents" rather than a standard sale of goods.
3. Ex-Ship Contracts
An Ex-Ship Contract is the opposite of a C.I.F. contract. The seller is required to deliver the actual physical goods to the buyer from a ship at the designated port of destination.
a. Seller's Duties: The seller must pay the ocean freight, release the shipowner's lien, and provide the buyer with a valid delivery order from the vessel.
b. Passing of Risk: The general property and risk do not pass to the buyer until the goods leave the ship's tackle and are delivered at the destination port.
Part VI: Comparative Reference Matrix for Maritime Contracts
Contract Type | Expense Allocation | Risk Allocation Metric | Nature of Symbolic Delivery |
F.O.B. (Free on Board) | Seller: Loading and port charges. Buyer: Freight and insurance. | Shifts to the Buyer the moment the goods cross the ship's rail at shipment. | Completed when the goods are placed on board the vessel. |
C.I.F. (Cost, Insurance, Freight) | Seller: Covers insurance and freight up to the destination. | Shifts to the Buyer from the moment of shipment, backed by insurance. | Formed by tendering the Bill of Lading, invoice, and policy. |
Ex-Ship | Seller: Bears all freight, insurance, and discharge fees. | Remains with the Seller until the items are delivered at the destination port. | Completed when the goods are delivered from the ship at destination. |
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