Obligations Regarding Delivery and Payment | Sale of Goods Act, 1930

The Sale of Goods Act, 1930 governs contracts where the ownership of goods is transferred from the seller to the buyer for a price. It lays down the legal framework governing the rights and obligations of both parties involved in a sales transaction. Among the core responsibilities are the obligations related to the delivery of goods and the payment of price, which form the backbone of any contract of sale.

Understanding Delivery under the Sale of Goods Act

Meaning and Types of Delivery

Section 2(2) of the Sale of Goods Act defines delivery as the "voluntary transfer of possession from one person to another". Delivery can be of various types:

• Actual Delivery: When goods are physically handed over.
• Constructive Delivery: When goods are already in possession of the buyer or a third party, and are acknowledged as being held on the buyer’s behalf.
• Symbolic Delivery: When goods are not physically delivered, but a symbolic item (like a key or document of title) is handed over.

Duties of the Seller Regarding Delivery

According to Section 31 of the Act, the seller has to deliver the goods, and the buyer must accept and pay for them as per the terms of the contract.

Other related provisions include:

• Section 32: Delivery and payment are concurrent conditions, unless otherwise agreed. The seller must be ready and willing to deliver, and the buyer must be ready and willing to pay.
• Section 33: Delivery must be of such a nature that it puts the buyer in possession of the goods.
• Section 36(1): Unless otherwise agreed, the seller must deliver the goods at the place they are at the time of sale.

Delivery of Wrong Quantity (Section 37)

This provision deals with the seller’s delivery obligations in case of:

• Short delivery: Buyer may reject or accept and claim damages.
• Excess delivery: Buyer may accept whole, accept part and reject rest, or reject all.
• Mixed delivery: Buyer may accept what was contracted for and reject the rest.

Delivery by Instalments (Section 38)

Delivery by instalments is not allowed unless the contract expressly provides for it. Breach in any instalment entitles the other party to rescind the whole contract if the breach goes to the root.

Place and Time of Delivery

1. Section 36: Rules as to Delivery

This section provides default rules when the contract is silent on delivery:

• If no place is agreed, goods must be delivered where they are at the time of sale.
• If the goods are future goods, the seller must produce them at the place of manufacture or procurement.
• If no time is fixed, delivery must be made within a reasonable time.

The concept of reasonable time is determined by the facts and circumstances of each case.

2. Expenses for Delivery (Section 36(5))

Unless otherwise agreed, the seller must bear the expense of putting the goods into a deliverable state.

Acceptance of Delivery by the Buyer

1. Section 42: What Constitutes Acceptance?

The buyer is deemed to have accepted the goods when:

• He intimates to the seller that he accepts them;
• He does any act inconsistent with the ownership of the seller;
• He retains the goods beyond a reasonable time without rejecting them.

2. Examination of Goods (Section 41)

• The buyer has the right to examine the goods upon delivery to ensure conformity with the contract.

Buyer’s Obligation Regarding Payment

1. Payment as Concurrent Condition (Section 32)

This section affirms that payment and delivery are concurrent obligations. The seller is not bound to deliver unless the buyer is ready to pay, and vice versa.

2. Time of Payment (Section 11)

Unless a different intention appears, stipulations as to time of payment are not of the essence of the contract. Delay in payment does not automatically entitle the seller to repudiate the contract, but may allow a suit for damages.

Risk and Property in Goods

1. Passing of Property and Risk (Sections 18–26)

The risk generally passes with the property in goods. Once the property is transferred, the buyer bears the risk, regardless of delivery or payment unless otherwise agreed.

2. Seller’s Right of Lien and Stoppage in Transit

If payment is not made, the seller has remedies like:

• Right of lien: Retain goods until payment.
• Right of stoppage: Resume possession of goods in transit if the buyer becomes insolvent (Sections 47–54).

Legal Remedies for Breach

1. Remedies of the Seller

Suit for Price (Section 55): If property has passed to the buyer and he wrongfully refuses to pay, the seller may sue for the price.

Damages for Non-Acceptance (Section 56): If the buyer refuses to accept delivery, the seller may claim damages.

2. Remedies of the Buyer

Damages for Non-Delivery (Section 57): Buyer may sue for damages if the seller wrongfully neglects or refuses to deliver.

Specific Performance (Section 58): Buyer may obtain specific performance of the contract in certain cases.

Remedy for Breach of Warranty (Section 59): Buyer may reduce the price or claim damages.

Judicial Interpretation

1. Behrend & Co Ltd v. Produce Brokers Co Ltd (1920)

In this case, the court held that once delivery had commenced, the buyer was entitled to receive the full quantity of goods as agreed before the ship left the port. In this case, the buyer accepted the portion that had been delivered, rejected the remaining undelivered goods, and was entitled to a refund for the prepaid amount corresponding to the undelivered balance. The court further clarified that, unless the parties had expressly agreed to delivery by instalments, the buyer was not obligated to accept partial deliveries.

2. State of Madhya Pradesh v. Orient Paper Mills Ltd. (1977)

In this case, the Supreme Court held that a lease allowing the cutting and removal of bamboo and salai wood was, in essence, a sale of goods. The so-called royalty paid was deemed the sale price, making the Forest Department a 'dealer' under the Madhya Pradesh General Sales Tax Act, 1958. The Court ruled that the transaction attracted sales tax and remanded the case for determination of the correct tax amount payable.

Contemporary Challenges and Interpretation

With the rise in e-commerce, digital contracts, and cross-border trade, the practical application of delivery and payment obligations is evolving. For example:

• Electronic Delivery: Software, e-books, etc., are delivered digitally, challenging the traditional notion of “delivery”.
• Payment Gateways: Payments often occur through third-party intermediaries, raising issues about the timing and confirmation of payment.
• GST Implications: The delivery of goods now requires GST-compliant documentation, affecting how delivery obligations are fulfilled.

In such contexts, courts increasingly rely on contractual terms, industry practices, and international trade standards to interpret delivery and payment obligations.

International Perspective and CISG

The United Nations Convention on Contracts for the International Sale of Goods (CISG) also reflects similar principles:

• Articles 31–34 deal with delivery obligations.
• Articles 53–59 deal with the buyer’s obligations, including payment and acceptance.

Although India is not a party to the CISG, it provides useful comparative guidance in cross-border transactions involving Indian parties.

Conclusion

The Sale of Goods Act, 1930, though nearly a century old, lays down robust principles regarding the obligations of delivery and payment that remain relevant today. These obligations are fundamental to the execution and enforcement of sale contracts. While the Act allows freedom of contract, it provides essential fallback rules that ensure fairness and certainty in trade. As commerce becomes increasingly digital and global, these provisions continue to evolve through judicial interpretation and commercial practices.

References

[1] The Sale of Goods Act, 1930

[2] Avtar Singh, Law of Sale of Goods (9th Edition)

[3] UNCITRAL, United Nations Convention on Contracts for the International Sale of Goods (CISG), 1980.

[4] Contract of Sale of Goods under Sale of Goods Act, 1930, Available Here

[5] Behrend & Co Ltd v Produce Brokers Co Ltd [1920] 3 KB 530

[6] State of Madhya Pradesh v. Orient Paper Mills Ltd. (1977 AIR 687)

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