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Sale of Goods

Effects of Destruction of Goods - Already Contracted

There are various kinds of goods and the parties have various options to agree about the delivery of the goods. What shall be the fate of a contract if the goods are perished or destroyed?

  1. Destruction before making of contract -- Where in a contract for sale of specific goods, at the time of making the contract, the goods, without knowledge of the seller, have perished or become so damaged as no longer to answer to their description in the contract, the contract shall become null and void. This is based on the rule of impossibility of performance. Since the subject matter of the contract, which is one of its essential ingredients, itself is destroyed, the contract cannot be carried out.

'Perishing of goods' includes not only complete destruction of the goods when the seller has been irretrievably deprived by the goods or when the goods have been stolen or have in some other way been lost and are untraceable, but also when the goods become un merchantable i.e. when the goods has lost their commercial value.

  1. Destruction After the Agreement to Sell but before Sale -- Where in an agreement to sell specific goods, if subsequently the goods, without any fault on the part of the seller of buyer, perish or become so damaged as no longer answer to their description in the agreement, the agreement shall become void, provided the goods are perished before the ownership and risk passes to the buyer. This rule is based on the ground of impossibility of performance.

If the title to be goods has already passed to the buyer, he must pay for the goods though the same cannot be delivered.

Documents of Title to Goods

A document of title to goods is one, which entitles and enables its rightful holder to deal with the goods represented by it, as if he were the owner. It is used in the ordinary course of business as proof of the ownership, possession or control of goods. It authorizes the possessor to receive the goods. It also confers a right on the possessor to transfer the goods to another person, by mere delivery or by proper endorsement the delivery.

Cash memo, bill of lading, dock warrant, warehouse keeper's or wharfinger's certificate, lorry receipt (L/R), railway receipt (R/R) and delivery order are some of the instances of document of title to goods.

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