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Chapter 3

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Buyer's Right upon Breach of Condition (Section 12(2))

Topic: Conditions and WarrantiesChapter: Chapter 3
textBreachofConditionimplies(textRighttoRepudiateContractlandtextRighttoClaimDamages)\\text{Breach of Condition} \\implies (\\text{Right to Repudiate Contract} \\land \\text{Right to Claim Damages})
This rule states that if a seller breaches a condition (a stipulation essential to the main purpose of the contract), the buyer has the right to treat the contract as repudiated (cancelled) and also claim damages for the loss incurred.

Buyer's Right upon Breach of Warranty (Section 12(3))

Topic: Conditions and WarrantiesChapter: Chapter 3
textBreachofWarrantyimplies(textRighttoClaimDamagesONLY)\\text{Breach of Warranty} \\implies (\\text{Right to Claim Damages ONLY})
This rule states that if a seller breaches a warranty (a stipulation collateral to the main purpose of the contract), the buyer's only remedy is to claim damages for the loss, and they cannot repudiate the contract.

When Breach of Condition is Treated as Breach of Warranty (Section 13)

Topic: Conditions and WarrantiesChapter: Chapter 3
(textBuyerwaivesbreachofcondition)lor(textContractnotseverablelandtextBuyeracceptedgoods)lor(textSpecificgoodslandtextPropertypassedtobuyer)implies(textBreachofConditiontreatedasBreachofWarranty)(\\text{Buyer waives breach of condition}) \\lor (\\text{Contract not severable} \\land \\text{Buyer accepted goods}) \\lor (\\text{Specific goods} \\land \\text{Property passed to buyer}) \\implies (\\text{Breach of Condition treated as Breach of Warranty})
This rule outlines the circumstances under which a breach of condition, which normally allows repudiation, must be treated as a breach of warranty, thereby limiting the buyer's remedy to claiming damages only, and losing the right to repudiate the contract.

Rule for Passing of Property - Specific Goods (Deliverable State)

Topic: Transfer of Ownership and DeliveryChapter: Chapter 3
If (Goods are Specific∧Goods are in Deliverable State∧Contract is Unconditional)  ⟹  Property Passes at Contract Formation (Sec. 20)\text{If } (\text{Goods are Specific} \land \text{Goods are in Deliverable State} \land \text{Contract is Unconditional}) \implies \text{Property Passes at Contract Formation (Sec. 20)}
This rule, enshrined in Section 20 of the Act, states that for specific goods already in a deliverable state, the property in the goods passes to the buyer at the time the contract of sale is made. This holds true irrespective of whether the time of payment or the time of delivery, or both, are postponed. The key conditions are that the goods must be identified and agreed upon at the time of contract (specific) and ready for delivery (deliverable state).

Rule for Passing of Property - Specific Goods (Not in Deliverable State)

Topic: Transfer of Ownership and DeliveryChapter: Chapter 3
If (Goods are Specific∧Goods are NOT in Deliverable State∧Seller does Act to make them Deliverable∧Buyer has Notice)  ⟹  Property Passes when Act is done and Buyer has Notice (Sec. 21)\text{If } (\text{Goods are Specific} \land \text{Goods are NOT in Deliverable State} \land \text{Seller does Act to make them Deliverable} \land \text{Buyer has Notice}) \implies \text{Property Passes when Act is done and Buyer has Notice (Sec. 21)}
According to Section 21, if the contract is for specific goods that are not in a deliverable state, the property does not pass until the seller has done whatever is necessary to put them into a deliverable state, and the buyer has received notice thereof. This emphasizes that the buyer must be aware that the goods are now ready.

Rule for Passing of Property - Unascertained Goods (Appropriation)

Topic: Transfer of Ownership and DeliveryChapter: Chapter 3
If (Goods are Unascertained∧Goods are Ascertained∧Unconditionally Appropriated to Contract∧By either party with assent of other)  ⟹  Property Passes upon such Appropriation (Sec. 23)\text{If } (\text{Goods are Unascertained} \land \text{Goods are Ascertained} \land \text{Unconditionally Appropriated to Contract} \land \text{By either party with assent of other}) \implies \text{Property Passes upon such Appropriation (Sec. 23)}
Section 23 deals with unascertained or future goods. The property in such goods does not pass until they are ascertained and unconditionally appropriated to the contract. 'Appropriation' means setting aside specific goods for the contract with the mutual assent of both the seller and the buyer. This act identifies the goods that will be delivered under the contract, thereby making them specific.

Damages for Non-Acceptance (Seller's Remedy)

Topic: Sale of Goods ActChapter: Chapter 3
D=Pc−PmD = P_c - P_m
This formula calculates the ordinary damages recoverable by the seller when the buyer wrongfully neglects or refuses to accept and pay for the goods. 'D' represents Damages, 'P_c' is the Contract Price, and 'P_m' is the Market Price of the goods on the date of breach. This applies when the market price is lower than the contract price, reflecting the seller's loss.

Damages for Non-Delivery (Buyer's Remedy)

Topic: Sale of Goods ActChapter: Chapter 3
D=Pm−PcD = P_m - P_c
This formula calculates the ordinary damages recoverable by the buyer when the seller wrongfully neglects or refuses to deliver the goods. 'D' represents Damages, 'P_m' is the Market Price of the goods on the date of breach, and 'P_c' is the Contract Price. This applies when the market price is higher than the contract price, reflecting the buyer's loss in having to purchase elsewhere at a higher price.

Damages for Breach of Warranty

Topic: Sale of Goods ActChapter: Chapter 3
D=Vw−VdD = V_w - V_d
This formula calculates the damages for breach of warranty. 'D' represents Damages, 'V_w' is the value the goods would have had if they had answered to the warranty, and 'V_d' is the actual value of the goods at the time of delivery. This aims to compensate the buyer for the reduced value of the goods due to the breach of warranty.

Damages for Non-delivery (Buyer's Remedy)

Topic: Companies Act, 2013Chapter: Chapter 3
D=Pmarket−PcontractD = P_{\text{market}} - P_{\text{contract}}
This formula is used to calculate the damages payable to the buyer when the seller wrongfully neglects or refuses to deliver the goods. The damages are typically the difference between the market price of the goods at the time of refusal to deliver and the contract price, provided the market price is higher than the contract price. (Section 57 of SOGA, 1930)

Damages for Non-acceptance (Seller's Remedy)

Topic: Companies Act, 2013Chapter: Chapter 3
D=Pcontract−PmarketD = P_{\text{contract}} - P_{\text{market}}
This formula is used to calculate the damages payable to the seller when the buyer wrongfully neglects or refuses to accept and pay for the goods. The damages are typically the difference between the contract price and the market price of the goods at the time of refusal to accept, provided the contract price is higher than the market price. (Section 56 of SOGA, 1930)

Calculation of Interest on Price

Topic: Companies Act, 2013Chapter: Chapter 3
I=P×R×TI = P \times R \times T
While not a direct SOGA formula, Section 61 allows the court to award interest to the seller at such rate as it thinks fit on the amount of the price from the date of the tender of the goods or from the date on which the price was payable. This is a standard financial calculation for interest, where 'I' is Interest, 'P' is Principal (the unpaid price), 'R' is the Rate of interest, and 'T' is Time (period for which interest is due).

Total Amount Due to Unpaid Seller

Topic: Unpaid SellerChapter: Chapter 3
Pdue=Pcontract+Eincidental−PreceivedP_{\text{due}} = P_{\text{contract}} + E_{\text{incidental}} - P_{\text{received}}
This formula calculates the total outstanding amount owed to the unpaid seller. PcontractP_{\text{contract}} represents the original contract price of the goods, EincidentalE_{\text{incidental}} includes any legitimate incidental expenses incurred by the seller (e.g., storage, preservation costs after buyer's breach), and PreceivedP_{\text{received}} is any partial payment already made by the buyer. This is the baseline amount the seller is entitled to recover.

Damages for Non-Acceptance (General Rule)

Topic: Unpaid SellerChapter: Chapter 3
Dnon-acceptance=Pcontract−PmarketD_{\text{non-acceptance}} = P_{\text{contract}} - P_{\text{market}}
This formula is used when the buyer wrongfully neglects or refuses to accept and pay for the goods, and there is an available market for the goods. PcontractP_{\text{contract}} is the contract price, and PmarketP_{\text{market}} is the market price of the goods on the date of the breach. This formula applies when the contract price is higher than the market price, representing the loss of profit to the seller. If the market price is higher or equal, nominal damages might be awarded, or specific damages if special circumstances are proven (Section 73 of Indian Contract Act).

Deficiency Recoverable after Resale

Topic: Unpaid SellerChapter: Chapter 3
Dresale=Pcontract−(Presale−Eresale)D_{\text{resale}} = P_{\text{contract}} - (P_{\text{resale}} - E_{\text{resale}})
When an unpaid seller exercises their right of resale (after giving due notice, where required) and the resale price is less than the original contract price, this formula calculates the deficiency that the seller can recover from the original buyer. PcontractP_{\text{contract}} is the original contract price, PresaleP_{\text{resale}} is the price obtained from the resale of the goods, and EresaleE_{\text{resale}} represents the reasonable expenses incurred in conducting the resale (e.g., advertising, commission). The seller is also entitled to recover these expenses.

Damages for Non-Delivery (Seller's Breach)

Topic: Indian Partnership ActChapter: Chapter 3
Damages=Market Price at date of breach−Contract Price\text{Damages} = \text{Market Price at date of breach} - \text{Contract Price}
This formula is applied when the seller wrongfully neglects or refuses to deliver the goods to the buyer. As per Section 56 of The Sale of Goods Act, 1930, the buyer can sue the seller for damages. The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract. If there is an available market for the goods, the damages are typically calculated as the difference between the market price of the goods at the time they ought to have been delivered (or at the time of refusal to deliver) and the contract price, provided the market price is higher than the contract price.

Damages for Non-Acceptance (Buyer's Breach)

Topic: Indian Partnership ActChapter: Chapter 3
Damages=Contract Price−Market Price at date of breach\text{Damages} = \text{Contract Price} - \text{Market Price at date of breach}
This formula is applied when the buyer wrongfully neglects or refuses to accept and pay for the goods. As per Section 57 of The Sale of Goods Act, 1930, the seller can sue the buyer for damages. The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract. If there is an available market for the goods, the damages are typically calculated as the difference between the contract price and the market price of the goods at the time when the goods ought to have been accepted (or, if no time was fixed, at the time of refusal to accept), provided the contract price is higher than the market price.

Elements of a Valid Contract of Sale

Topic: Formation of Contract of SaleChapter: Chapter 3
textContractofSale=textBuyer+textSeller+textGoods+textPrice+textTransferofProperty+textEssentialsofIndianContractAct\\text{Contract of Sale} = \\text{Buyer} + \\text{Seller} + \\text{Goods} + \\text{Price} + \\text{Transfer of Property} + \\text{Essentials of Indian Contract Act}
This conceptual formula represents the fundamental components required for the formation of a valid contract of sale. It includes the presence of two distinct parties (buyer and seller), specific goods as the subject matter, an agreed price, an agreement for the transfer of property in goods, and all the general essential elements of a valid contract as per the Indian Contract Act, 1872 (e.g., offer, acceptance, consideration, free consent, capacity, lawful object).

Determination of Price

Topic: Formation of Contract of SaleChapter: Chapter 3

P = \begin{cases} \text{Fixed by Contract} \ \text{Fixed by Agreed Manner} \ \text{Determined by Course of Dealing} \ \text{Reasonable Price (if not otherwise determined)} \end{cases}

This 'formula' illustrates the various ways in which the price for goods in a contract of sale can be determined according to the Sale of Goods Act, 1930. The price can be explicitly stated in the contract, agreed upon to be fixed in a particular manner, established by the past dealings between the parties, or, in the absence of these, a reasonable price must be paid by the buyer.
Chapter 3 Formulas — CA Foundation | Kartavvya