Sections 55 to 61 set out the personal remedies of each party. They operate alongside the seller's rights against the goods under S.46 to S.54, and are supplemented by the general principles of damages in S.73 and S.74 of the Indian Contract Act.
Legal Framework
| Provision | Party | Remedy |
|---|---|---|
| S.55(1) | Seller | Suit for the price where property has passed and the buyer refuses to pay |
| S.55(2) | Seller | Suit for the price where payable on a day certain irrespective of delivery |
| S.56 | Seller | Damages for wrongful neglect or refusal to accept and pay |
| S.57 | Buyer | Damages for wrongful neglect or refusal to deliver |
| S.58 | Buyer | Specific performance, in the court's discretion, for specific or ascertained goods |
| S.59 | Buyer | Remedy for breach of warranty: diminution in price, or damages |
| S.60 | Either | Repudiation before the due date; treat the contract as subsisting or as rescinded |
| S.61 | Either | Interest and special damages |
Seller's Remedies
Suit for the Price (S.55)
| Sub-section | Condition | Effect |
|---|---|---|
| S.55(1) | Property has passed and the buyer wrongfully neglects or refuses to pay | The seller may sue for the price |
| S.55(2) | Price is payable on a day certain irrespective of delivery | The seller may sue for the price even though property has not passed and the goods have not been appropriated |
Why the remedy depends on the passing of property: A claim for the price is a claim in debt for the agreed sum. It presupposes that the seller has performed his side by transferring ownership. Where property has not passed, the seller retains the goods and can mitigate by reselling, so his loss is the difference between contract and market value rather than the whole price. Allowing a price claim in that situation would over-compensate him, leaving him with both goods and money.
Damages for Non-Acceptance (S.56)
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue for damages for non-acceptance.
Measure: Ordinarily the difference between the contract price and the market price at the date of the breach, being the loss the seller suffers on reselling. Where there is no available market, the measure is the loss of profit.
Duty to mitigate: The seller must take reasonable steps to reduce his loss, normally by reselling within a reasonable time.
Buyer's Remedies
Damages for Non-Delivery (S.57)
Where the seller wrongfully neglects or refuses to deliver, the buyer may sue for damages for non-delivery.
Measure: The difference between the contract price and the market price at the date of the breach, being the cost of obtaining substitute goods. Where the buyer had a sub-sale of which the seller knew, loss of that profit may be recoverable subject to the rule on remoteness.
Facts: A mill shaft was sent for repair and the carrier delayed delivery. The mill stood idle and the owners claimed loss of profits. The carrier had not been told that the mill would be stopped for want of the shaft.
Issue: Was the carrier liable for the loss of profits caused by the delay?
Held: No. Damages are recoverable only for loss arising naturally from the breach in the usual course of things, or for loss which both parties knew at the time of contracting was likely to result from the breach. The stoppage loss was neither, since the special circumstances had not been communicated.
Relevance: The foundational rule on remoteness of damage, incorporated into Indian law by S.73 of the Contract Act and applied to sale of goods claims under S.57 and S.59.
Specific Performance (S.58)
Subject to the Specific Relief Act 1963, the court may, on the application of the buyer, direct that the contract shall be performed specifically. The remedy is discretionary and confined to specific or ascertained goods.
When it is granted: Where the goods are unique, of special value, or not readily obtainable in the market, so that damages would not be an adequate remedy. It is refused where substitute goods can be bought, since damages then place the buyer in the position he bargained for.
Remedy for Breach of Warranty (S.59)
Where there is a breach of warranty, or where the buyer elects or is compelled to treat a breach of condition as a breach of warranty, he cannot reject the goods. He may:
| Option | Content |
|---|---|
| Set up the breach in diminution or extinction of the price | Refuse to pay, or pay less, to the extent of the breach |
| Sue for damages for breach of warranty | Recover the loss suffered |
Measure: Ordinarily the difference between the value of the goods as delivered and their value had they answered the warranty.
Important limit: The buyer is not entitled to reject, and payment of a reduced price does not prevent the seller suing for the balance if the diminution claimed is excessive.
Anticipatory Repudiation (S.60)
Where either party repudiates the contract before the date of delivery, the other may either:
| Election | Consequence |
|---|---|
| Treat the contract as subsisting and wait till the date of delivery | The contract remains alive; the party waiting bears the risk of intervening frustration |
| Treat the contract as rescinded and sue for damages at once | Damages assessed by reference to the date of breach |
Why the election matters commercially: A party who keeps the contract alive may benefit if the market moves in his favour, but he also keeps his own obligations alive and risks the contract being discharged by a supervening event, in which case he loses his claim entirely. A party who accepts the repudiation crystallises his loss immediately at the current market level.
Interest and Special Damages (S.61)
| Claim | Provision | Content |
|---|---|---|
| Seller's interest on the price | S.61(2)(a) | From the date of the tender of the goods, or from the date on which the price was payable |
| Buyer's interest on the price paid | S.61(2)(b) | Where the price is recoverable, interest from the date of payment |
| Special damages | S.61(1) | Nothing in the Act affects the right to recover special damages where they are recoverable by law |
Recovery of the Price by the Buyer
Where the buyer has paid and the seller has failed to perform, or where there is a total failure of consideration, the buyer may recover the price paid.
Facts: A buyer purchased a car, used it for four months, and then found it had been stolen. He surrendered it to the true owner and sued for the whole price.
Held: The buyer recovered the entire price with no deduction for use. Breach of the implied condition as to the right to sell under S.14(a) meant he had received nothing of what he contracted for, namely ownership, so there was a total failure of consideration.
Relevance: The leading authority on recovery of the price. Cite where the seller had no title and the buyer seeks restitution rather than damages.
Illustrations
-
Suit for the price: A sells B a specific generator, property passing on contract, and B refuses to pay. Under S.55(1) A may sue for the price, since he has performed by transferring ownership.
-
Damages rather than the price: A contracts to supply 100 tonnes of unascertained cement and B repudiates before appropriation. Property has not passed, so A's remedy is damages for non-acceptance under S.56, measured by the difference between contract and market price.
-
Day certain for payment: A contract provides that the price is payable on 1 August whether or not delivery has been made. B does not pay. Under S.55(2) A may sue for the price even though property has not passed.
-
Damages for non-delivery: A fails to deliver goods contracted at Rs. 500 per unit when the market price has risen to Rs. 620. Under S.57 B recovers Rs. 120 per unit, being the cost of obtaining substitutes.
-
Remoteness of loss of profit: B had a lucrative sub-sale but never told A of it. A fails to deliver and B claims the lost sub-sale profit. Applying Hadley v Baxendale (1854), the loss is not recoverable, since it did not arise naturally and the special circumstances were not communicated.
-
Specific performance granted: A contracts to sell B a specific antique printing press of which no comparable exists in the market, then refuses to deliver. Under S.58 the court may order specific performance, damages being inadequate.
-
Specific performance refused: A refuses to deliver 200 standard bags of cement freely available in the market. Specific performance is refused; damages under S.57 adequately compensate B.
-
Breach of warranty: B buys a machine subject to an undisclosed encumbrance, a breach of the warranty in S.14(c). Under S.59 B may set up the breach in diminution of the price or sue for damages, but cannot reject the machine.
-
Anticipatory repudiation, election to wait: A repudiates on 1 May a contract for delivery on 1 July. B elects to keep the contract alive. On 15 June the goods are destroyed by an event that frustrates the contract. B loses his claim, having kept the contract on foot.
-
Total failure of consideration: B buys a car which turns out to be stolen and surrenders it after four months' use. Applying Rowland v Divall (1923), B recovers the entire price without deduction.
Recall Check
- Why is the seller's suit for the price ordinarily dependent on the passing of property?
- State the two limbs of the rule in Hadley v Baxendale and how they apply to a sale of goods claim.
- What are the two options open to a buyer on breach of warranty under S.59?
Key Cases
Hadley v Baxendale (1854) Hadley v Baxendale 1854
Issue: Whether a carrier was liable for loss of mill profits caused by delay, where the special circumstances had not been communicated.
Rule: Damages are recoverable for loss arising naturally from the breach, or for loss which both parties contemplated at the time of contracting as likely to result.
Held: The loss of profits was too remote and not recoverable.
Rowland v Divall (1923) Rowland v Divall 1923
Issue: Whether a buyer who used a stolen car for four months could recover the whole price.
Rule: Breach of the condition as to right to sell produces a total failure of consideration.
Held: The full price was recoverable with no allowance for use.
Distinctions
| Basis | Suit for the Price (S.55) | Damages for Non-Acceptance (S.56) |
|---|---|---|
| Property | Must have passed, unless a day certain was fixed | Need not have passed |
| Nature of claim | Debt for the agreed sum | Compensation for loss of bargain |
| Measure | The contract price | Difference between contract and market price |
| Duty to mitigate | Not applicable | Seller must resell within a reasonable time |
| Basis | Damages (S.57) | Specific Performance (S.58) |
|---|---|---|
| Availability | As of right on breach | Discretionary |
| Type of goods | Any goods | Specific or ascertained goods only |
| When appropriate | Substitutes are available in the market | Goods are unique or not readily obtainable |
| Governing statute | Sale of Goods Act with S.73 Contract Act | Sale of Goods Act with the Specific Relief Act 1963 |
| Basis | Breach of Condition | Breach of Warranty (S.59) |
|---|---|---|
| Right to reject | Yes | No |
| Right to repudiate | Yes | No |
| Damages | Available | Available |
| Diminution of price | Not the primary remedy | Expressly available |
Flashcards
When may a seller sue for the price?
Where property has passed and the buyer wrongfully neglects or refuses to pay (S.55(1)), or where the price is payable on a day certain irrespective of delivery (S.55(2)).
What is the measure of damages for non-acceptance?
Ordinarily the difference between the contract price and the market price at the date of breach, subject to the seller's duty to mitigate.
What is the measure of damages for non-delivery?
The difference between the contract price and the market price at the date of breach, being the cost of obtaining substitute goods.
State the rule in Hadley v Baxendale.
Damages are recoverable for loss arising naturally from the breach in the usual course of things, or for loss which both parties knew at the time of contracting was likely to result.
When will specific performance be ordered under S.58?
In the court's discretion, for specific or ascertained goods, where the goods are unique or not readily obtainable so that damages would be inadequate.
What are the buyer's remedies for breach of warranty?
Under S.59, to set up the breach in diminution or extinction of the price, or to sue for damages. He cannot reject the goods.
What options does a party have on anticipatory repudiation?
Under S.60, to treat the contract as subsisting and wait for the delivery date, or to treat it as rescinded and sue for damages immediately.
Why did the buyer in Rowland v Divall recover the full price?
Because breach of the condition as to right to sell meant he never received ownership, producing a total failure of consideration.
Exam Scenario
Problem: Yash contracts to sell Zoya 300 specific handloom carpets from an identified lot at Rs. 8,000 each, property to pass on payment, delivery on 1 September. Zoya has a sub-contract to supply a hotel chain at Rs. 11,000 each, which she mentioned to Yash while negotiating. On 20 July Yash writes saying he will not perform because the market has risen. Zoya does nothing and continues to hold Yash to the contract. On 25 August a fire destroys the identified lot without Yash's fault. Separately, in an earlier transaction, Zoya had bought a specific loom from Yash which turned out to be subject to an undisclosed hire purchase charge, cleared by Yash a month later after some disruption to Zoya's production. Advise Zoya.
Step 1: Identify the anticipatory repudiation and Zoya's election
Yash's letter of 20 July is an anticipatory repudiation, so apply S.60.
Zoya had an election: treat the contract as rescinded and sue at once for damages, or treat it as subsisting and wait for 1 September. She chose to wait.
Step 2: Follow that election through to the fire
By keeping the contract alive she also kept her own obligations alive and retained the risk of supervening events.
The carpets were specific goods from an identified lot, and property had not passed since payment had not been made. Their destruction by fire without Yash's fault therefore engages S.8: the agreement is avoided and both parties are discharged. Zoya loses her claim entirely.
| Election under S.60 | Damages assessed by reference to | Effect of the fire on 25 August |
|---|---|---|
| Accept the repudiation on 20 July and sue at once | The market price then prevailing | Irrelevant, the claim had already crystallised |
| Treat the contract as subsisting, as she did | 1 September, the delivery date | S.8 avoids the agreement and the claim is lost |
Step 3: Value the claim she has forfeited
Because she mentioned the hotel sub-contract during negotiation, the second limb of Hadley v Baxendale (1854) would have been satisfied.
The Rs. 3,000 per carpet margin would likely have been recoverable, making the lost claim substantial. That sharpens how commercially costly her election was.
Step 4: Classify the term breached on the loom
Freedom from encumbrances is a warranty under S.14(c), not a condition, so Zoya never had a right to reject.
Under S.59 her remedies are to set up the breach in diminution of the price or to sue for damages. Since Yash has cleared the charge, her recoverable loss is confined to the disruption to production during that month, measured by the difference in value or her actual proved loss.
Step 5: State the organising principle
The classification of the term determines whether rejection is available at all. On anticipatory breach, the innocent party's election determines whether she keeps or loses her claim.
Waiting is not a neutral choice. Keeping the contract alive under S.60 preserves the other party's obligations, but it leaves the electing party exposed to frustration and to destruction of the goods.
Specific goods with property unpassed engage S.8. The lot was identified and payment had not been made, so the fire avoids the agreement rather than founding a claim against Yash.
A communicated sub-sale cannot rescue a lost claim. Hadley v Baxendale (1854) would have let the Rs. 3,000 margin in, but only if a claim survived at all.
S.14(c) is a warranty, not a condition. No rejection is available, and S.59 confines Zoya to diminution of the price or damages.
Cure limits the loss, it does not erase it. Yash clearing the charge a month later cuts the damages down to the proved production disruption.
Conclusion. Zoya recovers nothing on the carpets, her election to wait having exposed her to S.8 when the identified lot burned. On the loom she recovers modest damages under S.59 for the month's disruption, with no right to reject.
See Also
- Rights of Unpaid Seller : the seller's rights against the goods which operate alongside these personal remedies.
- Conditions and Warranties : the classification that determines whether the buyer may reject or is confined to S.59.
- Passing of Property in Goods : why the passing of property decides between a claim for the price and a claim in damages.