Introduction

• The present case deals with Section 54(2) of the Sale of Goods Act, 1930 (SOGA) which talks about the rights of the resale of unpaid seller.
  • The unpaid seller may re-sell the goods to the third party within a reasonable time if the buyer doesn’t pay or tender the price.
  • The unpaid seller gives notice to the buyer either to fulfill his parts or bear the loss done to the unpaid seller.

Facts

• The Mysore Sugar Company (plaintiff), put certain items like copper ingots, copper scraps as well as brass tubes available with the company at Mandya, for sale.
• The defendant offered to purchase the same and the plaintiff accepted the offer of the defendant to purchase the various items.
• The buyer made a default in taking the goods, the seller gave him a notice that if the buyer didn’t lift the goods within three days the contract would be cancelled.
• The buyer did not lift the goods then after three months the seller did a resale of the goods and claimed damages.
• The Civil Court disallowed the suit for damages

Issues Involved

• Whether the plaintiff is entitled to recover any damages from the defendant?
• Whether the resale after the three months reasonable?

Observations

• The Court observed that it is needless to point out that a duty lies with the plaintiff to mitigate the damages.
• Even in view of Section 54(2) of SOGA, it was the duty of the plaintiff to see that re-sale was effected within a reasonable time, especially when the prices were falling for the relevant material.
  • Three months delay, therefore, on the facts of this matter, is certainly inordinate and the re-sale has not taken place within a reasonable time as contemplated in Section 54(2) of SOGA.
  • It is relevant to mention in this context that what the ruling price was in about September 1966 is not brought on record by the plaintiff, but he admitted that the prices were more at that time.
• The difference claimed as damages on the facts of this case, is also not much hence if the goods were re-sold in September 1966 within a reasonable time, the plaintiff would not have incurred any loss whatsoever.
• At any rate, since the burden of proving the damages was on the plaintiff and he has not placed any evidence on record in that behalf, the learned Civil Judge has rightly proceeded to disallow the suit for damages.
• The Court further said there has been an unreasonable delay in re-selling, on the facts of the present case, when the market price fell.
  • Hence, the value realised on re-sale does not afford good ground to fix the damages.
  • The plaintiff has come to Court. The burden is on him to prove the alleged damages and since he has not placed any material evidence to show that he has suffered damages, he has failed to prove his contention and therefore learned Civil Judge has rightly given the verdict.
• The Court further said that Section 54(2) of SOGA is a special law and Section 73 of Indian Contract Act, 1872 (ICA) is general law. Therefore, Section 54 prevails over Section 73 though both the sections are based on the same general principles.

Conclusion

• The Karnataka High Court dismissed the appeal and upheld the verdict of the Civil Judge.

Notes

Section 54 of SOGA - Sale not generally rescinded by lien or stoppage in transit —

(1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit.

(2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale.

(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer.

(4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and, on the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages.

Indian Contract Act, 1872

Section 73 - Compensation for loss or damage caused by breach of contract—

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract -When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation — In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.