Performance of Contract of Sale – Definition and Rules
You must have come across the word ‘Contract’, might have heard it from a movie, a series, or from your parents or teachers. So, what do I understand by the word Contract? Think of the answer by yourself before scrolling any further.
The Contract is the written agreement between two or more parties the breach of which may have consequences in the forms of penalties decided into a Contractual document. It is a legal agreement and has the effect of Law for its application. So while selling a product to the consumer there is either some form of written or verbal Contractual agreement. Business Law deals in detail with the meaning, scope, and uses of Contractual Law. In this particular article, we shall learn about the following concept of the Contract of Sales.
Table of Content
Introduction
What is the Performance of a Contract of Sale?
Definition of Delivery
Duty of the Buyer and the Seller
Payment and Delivery
Rules Regarding the Delivery of Goods
Solved examples
Key learnings from the topic
Frequently asked questions
What is the Performance of Contract of Sale?
The Sale of Goods Act 1930 states under Sec 31 that, “It is the duty of the seller to deliver the goods and the buyer to accept and pay for them, in accordance with the terms of the Contract of Sale.”
The performance of a Contract of Sale defines a simple transaction where the seller delivers the goods in exchange for a payment made by the buyer. Sections 31 to 40 of the Sale of Goods Act, 1930 state the rules and regulations that govern the Sale of goods and their delivery.
Let’s define delivery, buyer, seller and their duties.
Definition of Delivery
Under Section 2 (2) of the Sale of Goods Act, 1930, the delivery meaning has been stated as,
“voluntary transfer of possession of goods from one person to another.” The transfer of goods from one person to another will be considered a delivery under a Sale of goods act only when:
The transfer of goods is voluntary
The transfer is not done using theft, fraud or force
Mere possession of good does not constitute a valid delivery of goods
Duty of the Buyer and the Seller
The seller must deliver the goods as per the Contract of Sale. The buyer must accept the goods and make a payment as per the Contract of Sale.
Payment and Delivery are Concurrent
The payment and delivery of goods are concurrent conditions. The seller of the goods should be ready to make the delivery of goods in exchange for a payment and the buyer must be ready to make the payment for the delivery of goods unless agreed otherwise.
Rules Regarding the Delivery of Goods
Delivery
The delivery of goods can be done by putting the goods in the possession of the buyer or any other person authorized by the buyer to hold the goods on his behalf.
Partial Delivery of Goods
Partial delivery of goods made as progress towards full delivery has the same effect as full delivery, to pass the property in the goods. Partial delivery done with the intent of severing it from the whole does not constitute the delivery of the remaining goods.
Buyer Must Apply for Delivery
The buyer of the goods must apply to the seller for the delivery of goods unless otherwise stated in the terms, where terms of delivery meaning are the conditions mentioned in the Contract.
Place of Delivery
Both the buyer and the seller must agree to terms of delivery, express or implied, at the time of drawing up the Contract of Sale. If no such terms and conditions have been specified in the Contract:
Delivery of goods to be sold is done at the place where they are at the time of Sale
Delivery of goods to be sold is made at the place at which they are at the time of the agreement to sell. If the goods are not in existence at that time, they are delivered to the place of manufacture.
Time of Delivery
If the time of delivery of goods has not been specified in the Contract, it must be made within a reasonable time.
Goods in Possession of Third Party
If the goods have a third party at the time of Sale, then the third party must acknowledge to the buyer that the goods are being held on his behalf.
Time for Tender of Delivery
The demand for delivery must be made at a reasonable hour unless otherwise specified in the Contract.
Delivery Expenses
The expenses incurred for putting the goods in a deliverable state must be borne by the seller unless otherwise stated in the Contract.
Delivery of Wrong Quantity of Good
Goods for delivery means the goods sent by the seller at the time of delivery. If the seller sends a lesser or a larger quantity of the goods for delivery than what is specified in the Contract, the buyer has a right to reject the delivery of goods. If the buyer delivers a mix of goods where some parts are not as per the Contract, the buyer has the right to reject the goods that are not by the Contract.
Solved Example
1. John Agrees to Sell 100 kgs of Potatoes to Smith. At the Time of Delivery:
John Sends 60 kgs of Potatoes and 60 kgs of Tomatoes to Smith
John Sends 120 kg of Potatoes to Smith
2. Can Smith Refuse to Take the Delivery of the Goods?
Ans: In the above scenarios, since the delivery of goods is not according to the Contract, Smith can exercise the following options:
When the seller has sent a mix of goods:
The buyer can reject the complete order since it is not as per the Contract
The buyer can accept the delivery of 60 kgs of potatoes
When the seller has sent a larger quantity than specified in the Contract:
The buyer can reject the complete order since it is not as per the Contract
The buyer can accept the delivery of 60 kgs of potatoes
The buyer can accept the entire 120 kgs at the rate specified in the Contract
Key Learnings from the Chapter
Contract for the Sale of a good is the rule and regulations based on which the seller delivers a good in exchange for services
Delivery is the transfer of goods from one person to the other or from one place to another place
The seller must sell authentic, timely, and accurate delivery goods
The buyer must make the payment timely and not perform any act of fraud
Both the buyers and the sellers need to know their duties and rights.
FAQs on Performance of Contract of Sale: Legal Implications
1. What is the performance of a contract of sale?
The performance of a contract of sale refers to the fulfillment of the obligations agreed upon by both the buyer and the seller. Each party must do what was promised in the contract, such as delivering the goods or making payment. This includes all terms regarding the quality, quantity, and timing of delivery or payment. Essentially, performance means carrying out the agreed-upon actions or duties that complete the sale. Once each party fulfills their side, the contract is considered performed. A well-performed contract of sale ensures a smooth transfer of goods and clear legal rights for both parties involved.
2. What does performance of a contract mean in real estate?
In real estate, performance of a contract means that both the buyer and seller fulfill their duties as described in the sale agreement. This typically involves the seller transferring title to the property and the buyer completing payment within the agreed timeframe. These actions must be in line with the contract's conditions, including deadlines and requirements for inspection. Proper performance ensures a valid transfer of property rights, avoiding disputes over ownership or payment. Therefore, performance in real estate contracts is crucial to prevent legal issues and establish clear ownership.
3. What is an example of actual performance of a contract?
An example of actual performance of a contract of sale occurs when both parties fully meet their obligations. For instance, if a buyer agrees to purchase 100 units of a product, pays the agreed price on the due date, and the seller delivers the exact quantity and quality of goods at the specified time and place, both have completed actual performance. In this case, every responsibility outlined in the contract has been fully carried out. Actual performance leads to the discharge of the contract, as neither party has further obligations regarding the transaction.
4. What is the time limit for specific performance of contract?
The time limit for seeking specific performance of a contract is determined by law. Typically, the limitation period is three years from the date when the performance was due or refused. Specific performance is a legal remedy where a court orders a party to fulfill their obligations under the contract of sale. If a buyer or seller fails to apply for this remedy within the limitation period, their legal claim may no longer be valid. It is important for parties to act promptly to protect their contractual rights.
5. What happens if one party fails to perform a contract of sale?
If one party fails to perform their obligations in a contract of sale, it is considered a breach of contract. The non-breaching party has several options to address the breach, such as claiming damages or seeking specific performance through the courts. In some cases, the contract may allow for cancellation and return of goods or money. Failure to perform can lead to legal disputes and financial loss for the innocent party. It is essential to understand rights and remedies to handle breaches properly in a sale contract.
6. What are the requirements for valid performance in a contract of sale?
For performance in a contract of sale to be valid, certain essential requirements must be met. These ensure that obligations are carried out properly by both the buyer and the seller. Common requirements include:
- Goods must be delivered in the agreed quantity and quality.
- Payment must be made at the specified time and place.
- Performance must match all terms stated in the contract.
7. Can performance of a contract of sale be made by a third party?
Yes, the performance of a contract of sale can be carried out by a third party, unless the contract specifically requires personal performance. For example, a seller may have an agent deliver goods, or a buyer might have another person make the payment. The main condition is that the performance must comply with the contract's terms, and both parties must agree or not object to the third party's involvement. This flexibility can make the sale process smoother, as long as it does not breach any contract stipulations.
8. What distinguishes attempted performance from actual performance?
Attempted performance, also known as tender, occurs when one party offers to fulfill their contract obligations, but the other party refuses to accept it. Actual performance means the obligations have truly been completed. Distinguishing between the two is important:
- Attempted performance: The party is ready and willing but prevented from performing.
- Actual performance: The party has fully and properly performed all contractual duties.
9. How does time factor into the performance of a contract of sale?
Time can be a crucial element in the performance of a contract of sale, especially if the contract specifies exact dates for payment or delivery. When time is of the essence, failure to perform by the agreed date can constitute a breach, allowing the other party to terminate or seek damages. If time is not stated as critical, late performance may only entitle the other party to compensation, not necessarily contract termination. Clear contract terms regarding timing ensure both parties understand their obligations and minimize future disputes.
10. What legal remedies are available for non-performance of a contract of sale?
When a party fails to perform their obligations in a contract of sale, various legal remedies may be available to the injured party. Common remedies include:
- Claiming damages for losses suffered due to the breach.
- Requesting specific performance to compel fulfillment of the contract.
- Contract cancellation and restitution of money or goods.
11. Why is performance important in a contract of sale?
Performance is crucial in a contract of sale because it ensures that both the buyer and seller receive what they agreed to. Proper performance confirms the transfer of ownership, payment, and fulfillment of all expectations laid out in the contract. Without performance, parties risk disputes, financial loss, and legal complications. Ensuring both sides fulfill their obligations creates trust and leads to successful business transactions, making performance the foundation of contract law in sales.
