In this Chapter
1. Exclusion of Implied Terms and Conditions (Section 62)
1.3 Trade Usage
2. Reasonable Time (Section 63)
3.1 Aim
3.3 Bidder's Right to Withdraw Bid
3.4 Auctioneer's Right not to Accept any Bid
4. In Contracts of Sale, Amount of Increased or Decreased Taxes to be Added or Deducted (Section 64A)
Relevant Cases
1. Andrews v. Singer, (1934) 1 KB 17: (1933) All ER Rep 479 CA.
2. Chanter v. Hopkins, (1838) 4 M&W 339 (404): 8 LJ Ex 14.
3. Kar-Sales (Harrow) Ltd. v. Wallis, (1956) 1 WLR 936 CA.
4. Ernest Beck & Co. v. K.K. Syzman Owski & Co., (1924) AC 43.
5. Poeahontas Fuel Co. v. Ambatielos, (1922) 27 Com Cas 148 (152-3).
6. Steel Bros & Co. v. Dayal Khatao & Co., ILR (1923) 47 Bom 924.
7. Cointal v. Myham & Sons, (1913) 2 KB 220.
8. Haivela Investments Ltd. v. Royal Trusts Co. of Canada (CI) Ltd., (1986) AC 207.
9. Thornelt v. Haines, (1846) 15 M&W 367 (372).
10. Coffee Board v. Famous Coffee & Tea Works, MANU/TN/0156/1965 : AIR 1965 Mad 14.
11. Consolidated Coffee Ltd. v. Coffee Board Bangalore, MANU/SC/0398/1980 : (1980) 3 SCC 358: AIR 1980 SC 1468.
12. Jai Bhavani Timber v. State of Madhya Pradesh, MANU/MP/0055/1992 : AIR 1992 MP 250.
13. Zila Parishad, Muzaffarnagar v. Udaiveer Singh, MANU/UP/0232/1989 : AIR 1989 All 64.
14. Sramajibi Stores v. Union of India, AIR 1982 Del 76.
Miscellaneous is the last Chapter of the Sale of Goods Act, 1930 which consists of sections 62, 63, 64, 64A, 64B, 65 and 66. It speaks about Exclusion of implied terms, Reasonable time, Addition and Deduction of increased taxes amount, Repeal and Savings respectively.
1.
This section enables the parties to a sale to exclude liability for implied terms. It says as-
"Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both parties to the contract."
This section recognizes three modes by which liability for implied terms may be negatived. These are-(i) By express contract (ii) By course of dealing and (iii) By usage.
The Court has never seen those clauses of contract in good taste which excludes seller from his liability for breach of implied terms. Accordingly they are strictly construed and unless the liability is excluded by very appropriate terms, the seller is held responsible.
In the case; Andrews v. Singer, (1934) 1 KB 17: (1933) All ER Rep 479 CA, there was an agreement for the supply of "new singer cars", which excluded liability for "all conditions, warranties and liabilities, implied by statute, common law or otherwise." One car out of these were a used car. The buyer claimed damages for breach of contract. Then the sellers took the plea of exemption clause.
The Court of Appeal held that the sellers had excluded liability for implied conditions, whereas the undertaking to supply "new singer car" was not an implied condition but an express one.
In another case; Chanter v. Hopkins, (1838) 4 M&W 339 (404): 8 LJ Ex 14, Lord Abinger has explained about fundamental breach-
"If a man offers to buy peas of another and he sends him beans, he does not perform his contract. But that is not a warranty, there is no warranty that he should sell him peas; the contract is to sell peas and if he sends him anything else in their stead, it is a non-performance of it."
One more case; Karsales (Harrow) Ltd. v. Wallis, (1956) 1 WLR 936 CA, also gives a good example on fundamental breach. Here, a second hand Buick car was shown to a garage owner which was in an excellent condition. The garage owner shown his interest in buying it. The terms of contract were as-"No condition or warranty that the vehicle is roadworthy or as to its age, condition or fitness for any purpose is given by the owners or implied herein". When the seller brought the car to the buyer's premises at night, it was found that the vehicle was not in a good shape, it had been towed there, some parts were also missing and the engine was so defective that it was impossible to move the car. Denning LJ observed that it was a fundamental breach of the contract which disentitles the seller to rely on the exemption clause. He said-
"It is now settled that exemption clauses of this kind, no matter how widely they are expressed, only avail the party when he is carrying out his contract in its essential respects. He is not allowed to use them as a cover for misconduct or indifference or to enable him to turn a blind eye to his obligations. They do not avail him when he is guilty of a breach while it goes to the root of the contract."
In the case; Ernest Beck & Co. v. K. Syzman Owski & Co., (1924) AC 43, there was a contract note for the sale of 2,000 gross of '200 yards reels' of sewing cotton which contained following condition:
"The goods delivered shall be deemed to be in all respects in accordance with the contract and the contract and the buyer shall be bound to accept and pay for the same accordingly unless the sellers shall within 14 days after the arrival of the goods at the destination receive from the buyers notice of any matter by reason whereof they may allege that the goods are not in accordance with the contract."
Some 18 months after delivery of cotton, the buyer found that the length of cotton was less than 200 yards, and the average shortage was found as 6%. The buyer after finding this defect, brought an action against the seller. The sellers pleaded that the above condition was a bar to the action. But by a majority decision (3-2), it was held that the condition applied to quality only and not to quantity and that the buyers were entitled to judgment. Lord Shaw of Dunfermline observed as follows-
".......damages are claimed not in respect of the goods delivered but in respect of goods which were not delivered. Otherwise the results would be extraordinary; if the seller innocently sent forward the number of reels with only half the thread that should be upon them, the clause would cover that price for the whole thread, although he had supplied only half. The clause may cover objections to the goods delivered on the points, say, of quality, colour, weight or tensile strength. But the clause can never be used so as to convert goods undelivered into goods delivered."
In a contract of sale, the implied terms can also be negativated by a course of dealing between the parties. In the case; Poeahontas Fuel Co. v. Ambatielos, (1922) 27 Comp Cas 148 (152-3) Mc Cardie J., said that a course of dealing may arise with equal force from a written or parol bargain, or from the repeated occurrence of similar methods as between the parties. In each case, the question is as to the implication to be drawn from the past as applied to a new transaction.
In Steel Bros. & Co. v. Dayal Khatao & Co., ILR (1923) 47 Bom 924, it was held that a single transaction is not sufficient to exclude the implied incidents of a c.i.f. contract by which the buyer has to pay only against shipping documents.
1.3
The implied terms may be excluded by trade usage. In the case; Cointal v. Myham & Son, (1913) 2 KB 220, there was a sale of meat by a butcher which was seized and condemned as unfit for human consumption, the seller was allowed to give evidence of the fact that by the usage of the market no warranty of fitness for food was implied. Here, the buyer was, however, allowed to recover damages in respect of the fine and costs and for his loss of trade.
2.
It says-
"Where in this Act any reference is made to a reasonable time, the question what is a reasonable time, is a question of fact.
3.
Section 64 tells about the sale which takes place by auction-
"In the case of sale by auction-
(1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale;
(2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid;
(3) a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction;
(4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer."
(5) the sale may be notified to be subject to a reserved or upset price;
(6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.
3.1
Section 64 thus lays down the principles relating to auction sales. Benjamin1 while citing the case of; Harvela Investments Ltd. v. Royal Trusts Co. of Canada (CI) Ltd., (1986) AC 207 said-'an auction sale is a sale by competitive bidding, normally held in public at which prospective purchasers are invited to make successively increasing bids for the property, which is then usually sold to the highest bidder.
An auction sale is completed when the hammer falls. Before falling of the hammer, a bidder can retract from his bid but not after that. Property passes on the fall of the hammer.
Section 64(3) says that a right to bid may be reserved expressly by or on behalf of the seller and if such right is expressly so reserved, but not otherwise, the seller or any other person who is acting on behalf of the seller may subject to the provisions hereinafter contained, bid at the time of auction.
Sub-section (4) of this section forbids seller to take part in bid in person or through his agent unless it has been notified in sale. It shall not be lawful for the seller/auctioneer knowingly to take a bid from the seller or his agent. Any contravention of these rules renders the sale fraudulent.
In the case; Thornett v. Haines, (1846) 15 M&W 367 (372), it was held that the seller may, however, expressly reserve the right to bid at the auction and in that case bidding by him or on his behalf does not render the sale fraudulent or voidable, provided that he employs only one bidder. If he employs more than one, then the intention is not to protect his interest, but to enhance the price and that is fraudulent.
It was said in the case; Coffee Board v. Famous Coffee and Tea Works, MANU/TN/0156/1965 : AIR 1965 Mad 14 that the auctioneer has the right to make the auction subject to any conditions he likes-one of the conditions for auction sale of coffee was-"The seller does not bind himself to accept the highest bid or any bid, he is not bound to assign any reason for his decision and his decision shall be final and conclusive."
In Consolidated Coffee Ltd. v. Coffee Board, Bangalore, MANU/SC/0398/1980 : (1980) 3 SCC 358: AIR 1980 SC 1468, the Supreme Court has pointed out that the function of the fall of hammer or of any other customary manner of acceptance is only this that a contract of sale comes into existence and the parties get into the relationship of promisor and promisee. Section 64(2) does not deal with the question of passing of property. It merely deals with the completion of the contract of sale. If the conditions of section 20 are not satisfied, property will not pass even if the goods have been knocked down to a bidder.
One of the conditions of the auction was that the "property in the coffee sold shall not pass to the buyer until after he has paid the full price and the coffee sold to him is weighed and set apart for delivery to him." It was accordingly held that the property in goods could not have passed at the moment that they were knocked down. The Court further observed that where
_____________
1. Sale of Goods, 4th Edn., 1992, pp. 98-99.
a reserve price has been fixed, then even if the goods are specific, property will not pass if the highest bid falls short of the reserve price.
In Jai Bhavani Timber v. State of Madhya Pradesh, MANU/MP/0055/1992 : AIR 1992 MP 250, there was an auction of teak wood forest. The bids which were accepted were all above the reserved price except one lot. The question was that whether it was the effect of a 'ring' or 'knock-out' on the validity of the auction. The Court observed-
"We are also of the view that the formation of a 'ring cannot, in all circumstances, be taken as a good ground to set aside the sale. Bidder's right is a sort of a mutual agreement where one dealer agrees not to bid for one item and another for some other item. It is also described as a knock-out. This sort of formation of a ring or knock-out has not been regarded as illegal at common law in England or by any statutory law in India.
The Court cited the observation as given below from Pollock and Mulla on Sale of Goods and Partnership Act1-
"Knock-outs"-A combination between intending bidders to refrain from bidding against each other, commonly known as a 'Knock-out', has been held not to be illegal at common law and the same rule applies in India. The bidders may form a "ring" and refrain from bidding in competition with each other in order to depress the price.
3.3
A bidder can withdraw his bid before the acceptance of his bid is symbolized. If he does so his security amount cannot be forfeited. But, if he does so after the fall of the hammer, that amounts to a breach of the contract and his security deposit will become open to forfeiture.
3.4
It may happen that bids may not be accepted by the auctioneer and the auction may be cancelled.
In the case; Zila Parishad, Muzaffarnagar v. Udai Veer Singh, AIR 1980 All 64, the highest bidder was given the impression that his bid would be accepted and he was all the time acting under that expectation the Allahabad High Court held that the auction should not have been cancelled by reason of any secret parleys with another party and without giving any information or opportunity to the highest bidder to come to the negotiation table. This should particularly be so when the auction is by a public authority.
4.
This section was inserted by Act 41 of 1940, section 2
"(1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section
_____________
1. 5th Edn., p. 399: AIR 1992 MP 256.
(2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time-
(a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction.
(2) The provisions of sub-section (1) apply to the following taxes, namely:-
(a) any duty of customs or excise on goods;
(b) any tax on the sale or purchase of goods."
This section deals with the liability of the seller to pay sales tax to the Government. This section also provides for the rights and liabilities inter se of a seller and buyer of goods, where any customs or excise duty or any sales tax or purchase tax is imposed or its rate increased or decreased, or such duty or tax remitted in whole or in part after the making of the contract of sale.
The view behind enacting section 64A obviously was that the increase or decrease in duty should be taken note of in the case of contracts concluded prior to the increase or decrease. No party should be made to unnecessarily gain or suffer on account of such state action. In the case; Sramajibi Stores v. Union of India, AIR 1982 Del 76, the seller contracted to supply to the buyer waterproof coats and caps made of cotton canvas and therefore cotton canvas was the raw material from which the goods were to be manufactured. It was held that section 64A would be attracted if the exercise on the principal raw material, i.e. cotton canvas went up.
It is submitted that if section 64A is stretched too far i.e. to cover the raw materials which go into the making of goods subjected to contract of sale, several problems can arise. It is also worth mentioning here that the raw materials are certainly different from the finished products and both are subjected to independent transactions under the Act.
Section applicability is subject to any agreement the parties may make.
5.
Section 65 has been repealed by the Repealing Act, 1938 (1 of 1938) Sec. 2 and Sch.]
6.
"(1) Nothing in this Act or in any repeal effected thereby shall affect or be deemed to affect-
(a) any right, title, interest, obligation or liability already acquired, accrued or incurred before the commencement of this Act, or
(b) any legal proceedings or remedy in respect of any such right, title, interest, obligation or liability, or
(c) anything done or suffered before the commencement of this Act, or
(d) any enactment relating to the sale of goods which is not expressly repealed by this Act, or
(e) any rule of law not inconsistent with this Act.
(2) The rules of insolvency relating to contracts for the sale of goods shall continue to apply thereto, notwithstanding anything contained in this Act.
(3) The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way of mortgage, pledge, charge or other security.
© Universal law Publishing Co.