Breach of Contract & Auction Sale
Section 55. Suit for price.
55(1).
Sometimes, ownership (property in the goods) has already passed to the buyer under the contract.
If the buyer then wrongfully neglects or refuses to pay for the goods as agreed, the seller has a legal remedy.
In such a situation, the seller may file a suit for the price of the goods.
This allows the seller to recover the amount due under the contract.
55(2).
Some contracts specify that the price must be paid on a fixed date, regardless of whether the goods have been delivered.
If the buyer wrongfully neglects or refuses to pay the price on that fixed date, the seller has a remedy.
The seller may sue the buyer for the price, even if:
Ownership in the goods has not yet passed to the buyer.
The goods have not yet been appropriated to the contract.
Section 56. Damages for non-acceptance.
The buyer may sometimes wrongfully neglect or refuse to accept the goods.
The buyer may also wrongfully refuse to pay for the goods.
In either situation, the seller has the right to take legal action.
The seller may sue the buyer for damages caused by the buyer’s non-acceptance of the goods.
These damages compensate the seller for losses resulting from the buyer’s breach.
Section 57. Damages for non-delivery.
The seller may sometimes wrongfully neglect or refuse to deliver the goods to the buyer.
When this happens, the seller is in breach of contract.
The buyer is entitled to take legal action in response to this breach.
The buyer may sue the seller for damages for non-delivery of the goods.
These damages compensate the buyer for any loss caused by the seller’s failure to deliver.
Section 58. Specific performance.
This provision applies subject to Chapter II of the Specific Relief Act, 1877, which governs when specific performance may be granted.
In a suit for breach of contract involving specific or ascertained goods, the Court has a discretionary power to order specific performance.
If the plaintiff applies, the Court may direct that the contract must be performed exactly as agreed, meaning the defendant must deliver the specific goods.
The Court may do this without allowing the defendant the option of keeping the goods and simply paying damages.
So, the Court can require actual delivery rather than compensation.
The Court's decree may be either:
Unconditional, or made subject to terms and conditions,
The terms and conditions could be:
Payment of damages.
Payment of the price.
Any other terms the Court considers fair.
The plaintiff may apply for such a decree at any time before the final decree is passed.
Section 59. Remedy for breach of warranty.
59(1).
A breach of warranty occurs when the seller fails to fulfil a term that is collateral to the main purpose of the contract.
Sometimes the buyer may also treat a breach of condition as a breach of warranty.
In such situations, the buyer cannot reject the goods merely because there is a breach of warranty.
Rejection is not allowed for warranties and it is only allowed for conditions.
Instead, the buyer has two remedies:
(a).
Set up the breach of warranty against the seller.
The buyer may use the breach of warranty to reduce the price payable to the seller.
In some cases, this reduction may extinguish the price entirely, depending on the severity of the breach.
(b).
Sue the seller for damages.
The buyer may file a suit against the seller to claim damages for the loss caused by the breach of warranty.
This remedy compensates the buyer for the difference between what was promised and what was delivered.
59(2).
A buyer may use a breach of warranty to reduce or eliminate the price he must pay.
This is called Diminution or Extinction of price.
Doing this does not stop the buyer from also filing a separate claim for damages, if the breach has caused additional loss.
So, reducing the price does not cancel the buyer’s right to sue for further compensation.
Even if the buyer adjusts the price due to the breach, he may still sue for extra damage suffered.
Section 60. Repudiation of contract before due date.
Sometimes one party to a contract of sale may repudiate (reject or cancel) the contract before the delivery date.
When this happens, the other party has two options:
1. Treat the contract as still valid and wait until the delivery date to see if performance will occur.
2. Treat the contract as rescinded (terminated) immediately and sue for damages for the breach.
Section 61. Interest by way of damages and special damages.
61(1).
Nothing in this Act restricts the seller’s or buyer’s right to recover interest or special damages, provided the law allows such recovery.
Interest may be recoverable for delayed payments or overdue amounts.
Special damages may be claimed when additional loss has occurred due to a breach.
The Act also does not affect the right of either party to recover money already paid when the consideration for that payment has failed.
So, if one party paid money but did not receive what was promised, they may claim the money back.
61(2).
If there is no agreement between the parties specifying how interest should be handled, then:
The Court has the discretion to award interest at a rate it considers reasonable.
The Court may award interest in the following situations:
(a) Interest to the seller
The seller may receive interest in a suit for the price of the goods.
Interest may be awarded from either:
The date the goods were tendered (offered for delivery).
The date on which the price became payable, whichever applies.
(b). Interest to the buyer
The buyer may receive interest in a suit seeking refund of the price, when the seller has committed a breach.
Interest may be awarded from the date the buyer made the payment.
Section 62. Exclusion of implied terms and conditions.
Some rights, duties, or liabilities arise in a contract of sale automatically by implication of law.
These implied terms do not have to remain fixed; they can be modified or removed in certain ways.
The implied rights and duties may be negatived or varied through:
An express agreement between the parties.
The course of dealing between the parties (the way they have conducted business with each other in the past).
A usage of trade, provided the usage is one that binds both parties.
Section 63. Reasonable time a question of fact.
The Act frequently refers to actions needing to be done within a reasonable time.
What counts as a reasonable time is not fixed by the Act.
Instead, it is a question of fact, meaning it depends on the specific circumstances of each case.
Section 64. Auction sale.
64(1).
When goods are offered for sale in separate lots, the law treats each lot independently.
Each lot is prima facie (on the face of it) considered to form a separate contract of sale.
Selling goods in lots usually means each lot is its own separate sale, unless the circumstances show otherwise.
64(2).
In an auction sale, the sale becomes complete when the auctioneer announces the completion of the sale.
This announcement is typically made by the fall of the hammer, or through any other customary method used in auctions.
Until that moment, a bidder is free to retract (withdraw) their bid.
In simple terms: the bid is not binding until the hammer falls, and a bidder may withdraw at any time before that.
64(3).
The seller may reserve a right to bid at the auction.
This right must be expressly reserved, either by the seller or by someone acting on the seller’s behalf.
If the right is expressly reserved, then the seller or one authorised person on the seller’s behalf may place bids during the auction.
If this right is not expressly reserved, the seller cannot bid at the auction.
64(4).
If the auction does not announce that the seller has a right to bid, then the seller is not allowed to place bids.
The seller also cannot employ another person to bid on his behalf when such a right has not been notified.
The auctioneer is also prohibited from knowingly accepting a bid from the seller or anyone bidding for the seller.
If this rule is violated, the sale may be regarded as fraudulent by the buyer.
64(5).
An auction may be announced as being subject to a reserved price or upset price.
This means the goods will not be sold unless bidding reaches at least that minimum price.
In simple terms: the seller can set a minimum acceptable price, and the auction will only conclude if that price is met or exceeded.
64(6).
If the seller uses pretended bidding (fake bids) to artificially increase the price, it is unlawful.
In such a case, the sale becomes voidable at the buyer’s option.
So , the buyer may choose to cancel the sale because the price was unfairly manipulated.
Section 64A. In contracts of sale, amount of increased or decreased taxes to be added or deducted.
64A(1).
This rule applies unless the contract shows a different intention.
When a tax of the type referred to in 64A(2) is imposed, increased, decreased, or remitted after the contract of sale is made, then:
The rights of the seller and buyer change as follows.
This applies to two types of contracts:
Contracts where the goods were not taxable at the time of the contract.
Contracts where the goods were tax-paid at the time of the contract.
(a).
If the tax is imposed or increased
When a new tax is imposed, or an existing tax is increased after the contract is made, and the seller has to pay the tax or the increased amount, then:
The seller may add that amount to the contract price.
The seller is legally entitled to:
Add the tax amount to the price.
Demand payment of the additional amount.
Sue for and recover it if necessary.
(b).
If the tax is decreased or remitted
When the tax is reduced or completely removed after the contract is made, and the buyer becomes liable to pay only the reduced tax or no tax at all, then:
The buyer may deduct the reduced or remitted amount from the contract price.
The buyer:
Cannot be forced to pay the full earlier price.
Is not liable for the deducted amount.
Cannot be sued for the amount saved due to the tax decrease.
64A(2).
The rule in sub-section (1) regarding price adjustment applies only to specific types of taxes.
These are:
(a).
Any customs duty or excise duty imposed on goods.
Customs duty applies to imported or exported goods.
Excise duty applies to goods manufactured within the country.
(b).
Any tax on the sale or purchase of goods.
This includes sales tax, purchase tax, or similar taxes charged on transactions involving goods.
Section 65. [Repealed.].
Section 66. Savings.
66(1).
The Act states that neither it nor any repeal it brings about shall affect the following:
(a).
Any right, title, interest, obligation, or liability that was already acquired, accrued, or incurred before the Act came into force.
Anything legally gained or owed before the Act started remains valid.
(b).
Any legal proceedings or remedies concerning such earlier rights, obligations, or liabilities.
Cases already filed or rights to sue remain unaffected.
(c).
Anything that was done or suffered before the Act came into force.
Past actions or events are not changed by the new law.
(d).
Any existing law relating to the sale of goods that has not been expressly repealed by this Act.
Only laws specifically repealed are affected and others continue to apply.
(e).
Any rule of law that is not inconsistent with this Act.
Existing legal principles remain valid unless they conflict with the provisions of this Act.
66(2).
Contracts for the sale of goods are also affected by the rules of insolvency.
Insolvency rules will continue to apply, even though this Act governs contracts of sale.
Nothing in this Act overrides, limits, or changes the insolvency rules as they apply to such contracts.
66(3).
This Act deals with contracts of sale, where goods are transferred for a price.
However, some transactions may look like contracts of sale but are not actually meant to transfer ownership.
Instead, they are intended to function as a mortgage, pledge, charge, or other form of security for a loan or obligation.
For such transactions, the provisions of this Act do not apply.
The law treats them according to the rules of security transactions, not as sales.
