Introduction

This case deals with Section 18 of the Sale of Goods Act, 1930 (SOGA) which says contract for sale of unascertained goods and no property shall pass unless goods are ascertained.

Facts

• In this case the respondent agreed to sell the stock of 415 tons to the appellant which was in the Godown of the respondent.
• It was an unconditional contract for the sale of specific goods in the deliverable state and the property in goods then passed to the appellants.
• But after some time, both agreed orally to change the contract and the appellant would buy 300 tons of stock out of 415 tons of newsprint and the contract was substituted by specific goods to sale of unascertained goods.
• The appellant took delivery of some stock then refused later to take delivery of balance and repudiated the contract.
• Then after giving the notice the respondent sold the goods to a third party and sought to recover damages for the difference between the contract price and resale price of the goods.

Issue Involved

• Whether the resale not properly made until the property in the goods passes to the original buyer?

Observations

• The Court observed that the seller can claim as damages the difference between the contract price and the amount realised on resale of the goods where he has the right of resale under Section 54(2) SOGA.
• The statutory power of resale under Section 54(2) SOGA arises if the property in the goods has been passed to the buyer subject to the lien of the unpaid seller.
• Where the property in the goods has not passed to the buyer, the seller has no right of resale under Section 54(2) SOGA.
• The Court further observed that the effect of the variation of the contract was that the appellants and the respondent became joint owners of the stock of 415 tons, and this was not the correct legal position.
• The parties did not intend that the appellants would buy an undivided share in 415 tons of newsprint. The bargain between the parties was that the appellants would buy, and the respondent would sell 300 tons out of the larger stock of 415 tons.
• The Court said that it is true that originally the property in the entire 415 tons had passed to the appellants. But the result of the variation of the contract was to annul the passing of property in the goods.
• The effect of the bargain was that the respondent would sell and deliver to the appellants any 300 tons out of the larger stock of 415 tons. The property in the entire stock of 415 tons belonged to the respondent. The parties did not intend that as from the specific date, the property in any individual portion of the stock of 415 tons would remain vested in the appellants.
• The Court further said that no portion of 415 tons of the newsprint lying in the respondent's Godown was appropriated to the contract by the respondent with the appellant's consent before the resale.
• On the date of the resale, the property in the goods had not been passed to the buyer. Consequently, the respondent had no right to resell the goods under Section 54(2) SOGA.
• The Court said that the respondent is entitled to claim as damages the difference between the contract price and the market price on the date of the breach.
• Where no time is fixed under the contract of sale for acceptance of the goods, the measure of damages is prima facie, the difference between the contract price and the market price on the date of the refusal by the buyer to accept the goods.
• Hence the court said that, the present case, no time was fixed in the contract for acceptance of the goods therefore the respondent is entitled to the difference between the contract price and the market price.

Conclusion

The Court held that no property in goods passed, and respondent had no right to resell goods and claim to recover deficiency on resale not sustainable.

Notes

SOGA

Section 18 - Goods must be ascertained —

Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.

Section 54(2) - Sale not generally rescinded by 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.