DESTRUCTION OF GOODS
Destruction of goods
Meaning: Destruction of goods means that the goods are damaged or perished or become so damaged that they no longer answer to their description in the contract, e.g. cement is spoiled by water and converted into stones becomes unsaleable as cement, or sugar becomes sharbat by rain water and cannot be sold as sugar:
1. Specific goods perishing before making of contract, may be
(a) perishing of whole goods.
(b) perishing of part of goods.
(c) goods lawfully requisitioned by government.
2. Specific goods perishing after agreement to sell but before sale.
3. Perishing of future goods.
4. Perishing of unascertained goods.
1. Specific goods perishing before contract-Section 7
(a) Goods no longer answer description: Where under a contract of sale of specific goods the goods have been destroyed or perished, the legal position is as:
(i) Perishing of whole goods: A contract for the sale of specific goods is void if either at the time the contract was made, the goods have without the knowledge of the seller, perished or where the goods become so damaged as no longer answer to their description in the contract.
So if cement is spoiled by water and converted into stones will become unsaleable as cement. Similarly sugar when become sharbat by rain water cannot be sold as sugar. However, if the goods, though damaged, still answer the description, the contract is not void.
Example: A contracts to sell B 1,000 Kashmiri Shawls on 15th March, the seller has no knowledge that the shawls were destroyed by fire on 3rd March. The contract is void and B cannot enforce it.
(ii) Perishing part of goods: Where in a contract for specific goods only a part of the goods have been destroyed or damaged at the time of contract, the legal position is as:
a. if the contract is one and indivisible the contract is void.
b. if the contract is divisible it is not void, the part in good condition must be accepted by the buyer.
(b) Goods lawfully requisitioned: Where the seller is irretrievably deprived of the goods or when the goods have been requisitioned by the Government or seized by enemy during war, the contract is void.
2. Goods perishing after agreement to sell but before sale- Section 8
Rule: Where there is an agreement to sell specific goods and subsequently the goods, without any fault on the part of the seller or buyer, perish (or become so damaged as no longer answer to their description in the agreement) before the risk passes to the buyer, the contract becomes void and both the parties are freed from the liability of performing the same. This rule is based on the ground of impossibility of performance.
Under section 2(5) fault means wrongful act or default.
Condition: Under section 8 to avoid a contract following conditions are necessary:
(i) contract must not be an agreement to sell and nor an actual sale.
(ii) loss must be specific.
(iii) loss must not be caused by wrongful act or default of either party.
(iv) goods must perish before risk passes to the buyer.
When only part of the goods have perished the rule is thus: (a) if contract is indivisible it becomes void and (b) if divisible, the parties are not responsible for performance as regards goods which have perished, Section 26.
Example: A contracts to sell B 8,000 kilos of Egyptian cotton on 20th August which was dispatched by ship named Aiamgir. The ship was torpedoed during Iran-Iraq war on 5th October. The consignment did not reach the buyer. The agreement is void due to impossibility of performance. So B cannot sue for the performance of the contract.
3. Perishing of future goods When there is a contract for the sale of future goods and such goods are destroyed, the contract becomes void.
4. Perishing of unascertained goods Remember section 7 and 8 apply to specific goods and not to unascertained goods.
Where the agreement is to sell unascertained goods, the seller is not relieved of his obligation to deliver the goods even if the whole quantity of such goods in the possession of seller has perished.
Example: A agreed to sell B 10 Philips T.V. set outs of 100 sets stored in his godown. All the sets were destroyed by fire at the time of contract and both A and B were unaware about the destruction.
Contract is not void and A must supply 10 Philips T.V. sets or pay demages for breach as the contract was for unascertained goods.
Documents of title-Section 2(4)
Meaning and nature: A document of title to goods is that which entitles the possessor to deal with the goods described in it as if he were the owner. It is used in ordinary course of business as a proof of the possession or control of goods. Document of title authorizes, either by endorsement or by delivery, its possessor to transfer or receive goods represented by it. It symbolizes the goods and confers a right on the purchaser to receive the goods or to further transfer such right to another person.
Conditions: The relevant conditions are:
a. document of title must be used in the ordinary course of business.
b. undertaking to deliver the goods to the possessor of the document must be unconditional.
c. possessor of document, by virtue of holding it, must be entitled to receive goods unconditionally.
Types: Certain types of documents of title are:
1. Bill of lading is a document acknowledging the shipment of goods5 signed by or on bealf of the carrier, and containing the terms and conditions upon which it has been agreed that the goods are to be carried. It is also described as a contract for the conveyance of goods in a general ship.
2. Dock warrant is a document issued by a dock owner, containing details of goods and confirming that the goods are held to the order of the person named therein or endorsee. Dock warrant authorizes the person holding it to receive possession of the goods.
3. Warehouse-keeper’s or wharfinger’s certificate is a document issued by a warehouse-keeper or a wharfinger stating the goods specified therein are stored and kept in his warehouse or in his wharf.
4. Railway receipt is a document issued by the railway authorities acknowledging receipt of goods. The railway receipt is to be presented by the holder or consignee at the distinction to the railway authorities for obtaining delivery of goods.
5. Delivery order is a document containing an order by the seller of the goods to the holder of the goods on his behalf, requiring him to deliver the quantity stated therein to the person named in the document.