Law Commission Of India Report No. 8
Sale of Goods Act, 1930
Forwarded to the Union Minister of Law and Justice, Ministry of Law and Justice, Government of India by M.C. Setalvad, Chairman, Law Commission of India, on March 1, 1958.
M.C. Setalvad. Shri A.K. Sen,
Minister of Law,
Sale of Goods Act, 1930
"The language, however, is not very happy and logically comes very near to being a contradiction in terms; for if the property passes despite the non-fulfilment of the stipulations, the stipulations are not conditions at all, whereas if the stipulations are conditions, the property does not pass if they are not fulfilled, unless the buyer waives their performance by accepting the goods or otherwise."According to the learned authorsl, section 13(2) is perhaps intended to express and may possibly be considered as giving effect to the rule of common law as stated by Blackburn, J:
"Generally speaking, when the contract is as to any goods, such a clause is a condition going to the essence of the contract; but when the contract is as to specific goods, the clause is only collateral to the contract, and is the subject of a cross action or matter in reduction of damages—Heyworth v. Hutchinson, 1867 LR 2 QB 447 (451)."In Lal Chand v. Baij Nath, ILR (1936) 63 Cal 736 (745), Amir Ali, J., commenting on this sub-section, stated:
"I concede, therefore, that it is highly desirable that the sub-section should be couched in less equivocal language. For my own part, having regard to the large volume of modern business done upon sale by sample, I would be glad to see the sub-section omitted. That, however, is a matter for the legislature."Two courses have been suggested to meet this difficulty.
(a) To take away the sale of specific goods by sample from the operation of section 13(2) to avoid the conflict1 with section 17 which provides for implied conditions in the case of contracts for sale by sample. Property in specific goods in a deliverable state passes to the buyer when the contract is made (section 20). In modern times, there is a large volume of sale of specific goods by sample. Section 17(2)(a) gives rise to an implied condition that the bulk should correspond with the sample in quality. However, in a case where the property has passed to the buyer already when the contract is made (section 20) and the property is delivered subsequently but it does not correspond with the sample, the implied condition raised by section 17(2)(a) stands frustrated as the buyer will be compelled to treat the implied condition as a warranty. In G. Mackenzie and Co. Ltd. v. Nagendra Nath, ILR (1946) 1 Cal 225, it was held that section 13 is not limited to a breach of an express condition but extends also to a breach of an implied condition. The result is that the buyer will have no right to reject the goods and will have to fall back upon his remedies under section 59 for breach of warranty only. Pollock and Mulla,2 point out that there may be cases of sale of specific goods by description also if the buyer relies on their description.1. Vide Pollock & Mulla Indian Sale of Goods Act, 2nd Edn., p. 62. 2. Indian Sale of Goods Act, 2nd Edn., p. 62. In view of these considerations it has been suggested that in order to give relief to such buyers, the following sub-section may be inserted as sub-section (4) to section 13:
"Sub-section (4):—Nothing in sub-section (2) shall affect the case of sale of specific goods by sample or description".
(b) In the alternative, it is suggested that section 13(2) should be deleted.In our opinion, the better course would be to omit from section 13(2) the words "or where the contract is for specific goods the property in which has passed to the buyer". 17. Sections 14-15.—No alteration is necessary in sections 14-15. 18. Section 16.—It was pointed out by the Deputy Director of the Indian Standards Institution that though under sections 5 and 6 of the Indian Standards Institution (Certification Marks) Act of 1952, persons are prohibited from making improper use of standard marks and of certain names, there is no provision in the law to enable the buyer to repudiate a contract if the goods sold on the basis that they are in accordance with the standards laid down by Government do not conform to the Government standards. It was, therefore, suggested that a provision should be inserted in section 16 of the Sale of Goods Act that when Government, lays down any compulsory standard for any products, the products sold should conform to that standard. We had the advantage of a discussion with the Deputy Director on this subject. It appears that the Act itself contains no provision prescribing any particular standard of quality for any of the standard marks envisaged by the Act. The Act only penalises the use of standard marks otherwise than in accordance with its provisions. There are, of course, some other Acts which lay down or provide for the making of rules to prescribe standards of quality, such as the Agricultural Produce (Grading and Marking) Act, 1937, and the Drugs Act, 1940. The Drugs Act prohibits the sale of goods which are not of the standard quality. It is, however, not possible from such penal provisions to imply the existence of a condition or warranty regarding the quality of the goods, the breach of which may entitle the buyer to civil consequences under the Sale of Goods Act. What is necessary to achieve the object in view is a provision which will imply in such cases a condition or warranty regarding the quality of the goods, to the effect that the goods sold are of the quality which the standard or other mark carries with it. In the absence of an express or implied condition or warranty regarding the quality of the goods, the purchaser would not be able to claim a right to repudiate the contract or claim damages for breach of the warranty. He may be liable for the penalties provided under the Acts. The enactment of a statutory condition or warranty may affect a large class of merchants and middlemen. It is a matter of policy to be decided by the Union and the State Governments whether they should undertake such legislation. In the circumstances we do not propose to make any recommendation on the question raised by the Deputy Director. 19. Sections 17-24.—No alteration is necessary in sections 17 to 24. 20. Section 25.—In sub-sections (2) and (3) of section 25, we propose to include the case of railway receipts. Goods are frequently consigned by rail with the railway receipts made out in the name of the consignor or his agent or bank with the clear intention of reserving a right of disposal to the consignor and there is no reason why in these cases the consignor by rail should not have the same rights as the consignor by ship. 21. Section 26.—No change is necessary in section 26. 22. Section 27.—It has been suggested by the Government of Bihar that the words "good faith" in section 27 should be given the same meaning as in section 52 of the Indian Penal Code. The words "good faith" are not defined in the Act and the definition in the General Clauses Act is applicable. We have carefully examined this suggestion but are unable to accept it. We do not feel that a definition which is appropriate to the purposes of the Criminal Law should be imported into the Civil Law, the considerations applicable to the two systems being very different. 23. Sections 28-53.—No change is necessary in sections 28 to 53. 24. Section 54.—It has been suggested that the following be inserted as subsection (5) in section 54:
"The seller is bound to exercise reasonable care and judgment in making a resale and subject to this requirement he may make a resale either by public or private sale".This suggestion appears to be based on section 60(5) of the Uniform Sales Act of the United States referred to earlier. The principle contained in this suggested sub-section has already been applied by Indian decisions and is in our view implicit in section 54. 25. It has also been suggested that the phrase "perishable goods" should be defined. In our opinion, it is difficult to define this phrase with precision. The phrase is well understood in the commercial world and judicial decisions and text books have made its meaning clear. 26. Sections 55-64.—No alteration is considered necessary in sections 55 to 64. 27. Section 64A.—Section 64A was inserted by Act XLI of 1940 to replace section 10 of the Indian Tariff Act, 1934. That provision had been enacted on the lines of section 10 of the Finance Act, 1901 (1 Edw. 7, c.7), which referred only to customs and excise duty. Since then, the incidence of a purchase tax has also been covered in England by section 24 of the Finance Act, 1948 (11 & 12 Geo. 6, c. 49). On principle, there is no reason why there should not be a similar provision to deal with the case of the imposition or change in the rate of a sale or purchase tax subsequent to the making of a contract for the sale of goods. We have, accordingly, proposed the insertion of a new section (section MB of the Appendix) relating to sales tax, on the lines of section MA. We also think it desirable to make the provisions of section 64A and section MB subject to an agreement to the contrary. That is the position in England. -This can be brought about by the addition of the words "unless otherwise agreed" at the commencement of section MA. 28. It was suggested that the Indian Bills of Lading Act, 1856 (Act IX of 1856) should be consolidated with the Sale of Goods Act. In particular, it was suggested that section 2 of the Bills of Lading Act should be enacted as subsection (8) to section 51 of this Act which deals with duration of transit, and that sections 1 and 3 of the Bills of Lading Act should be inserted in this Act as sections MB and 64C in order to give effect to the right of stoppage in transit or claims for freight. In our opinion, the ambit of the Bills of Lading Act is wider than that of the Sale of Goods Act and embodying the provisions of the Bills of Lading Act in the Sale of Goods Act, would result in disturbing the frame, the structure and the unity of the Sale of Goods Act. In our view, the proper place for the Bills of Lading Act would be a comprehensive enactment dealing with the Law of Carriers, in all its aspects. The framing of a comprehensive law dealing with Carriers is under our consideration. 29. In order to give a concrete shape to our proposals, we have, in the Appendix, put them in the shape of draft amendments to the 'relevant sections of the Act.' The Appendix is not, however, to be treated as a draft Bill. M.C. Chagla, Chairman K.N. Wanchoo, Member P. Satyanarayana Rao, Member N.C. Sen Gupta, Member V.K.T. Chari, Member D. Narasa Raju, Member S.M. Sikri, Member G.S. Pathak, Member G.N. Joshi, Member N.A. Palkhivala, Member K. Srinivasan, Durga Das Basu, Joint Secretaries New Delhi. Dated: 1st March, 1958.
Proposals As Shown In The Form Of Amendments
[This is not a draft Bill]1. Amendment of section 1.—In sub-section (1) of section 1 of the Indian Sale of Goods Act, 1930 (3 of 1930), (hereinafter referred to as the "principal Act"), omit the word "Indian". 2. Amendment of section 2.—In clause (7) of section 2 of the principal Act, after the words "stock and shares", insert the words "electricity, water and gas". 3. Amendment of section 13.—In sub-section (2) of section 13 of the principal Act, omit the words "or where the contract is for specific goods the property in which has passed to the buyer,". 4. Amendment of section 25.—In section 25 of the principal Act—
(a) in sub-section (2) , for the words "where goods are shipped and by the bill of lading" substitute the words "where goods are shipped or sent by railway and by the bill of lading or railway receipt";
(b) in sub-section (3), for the words "bill of lading" wherever they occur, substitute the words "bill of lading or railway receipt".5. Amendment of section 64A.— In section 64A of the principal Act, add the words "unless otherwise agreed" at the commencement of the section. 6. Insertion of new section 64B.—After section MA of the principal Act, insert the following section:
"Section 64B—Application of section 64A to sale or purchase tax.The provisions of section 64A shall apply in relation to the imposition, increase, decrease or remission of any tax on the sale or purchase of goods chargeable from the seller as they apply in relation to the imposition, increase, decrease or remission of any duty of customs or excise on goods".