INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

PERFORMANCE OF CONTRACT IN RELATION TO

INTRODUCTION

In recent times, electronic commerce has become part and parcel of daily life and many business
transactions worth millions are made through this ever booming, newly found industry. This
technological improvement has brought faster means of conducting business transactions, different
from that of paper transactions as the steps that are necessary to conclude and form an e-contract
is different and may be considered more technical than usual traditional contracts. As a result of
which, this research article attempts to highlight some of the sections of Chapter IV of Sale Of
Goods Act, 1930 which deals with the performance of contract with special reference to E-
Commerce in India and would also attempt to highlight the issues that are faced in the performance
of E-Contract under the said act. In order to show the implications of the performance of E-
Contracts under the said act, it is necessary to understand the meaning of E-Contract. E-contract
is one of the divisions of E-Commerce. It holds a similar meaning of traditional business wherein
goods and services are switched for a particular amount of consideration. The only extra element
it has is that the contract here takes place through a digital mode of communication like the internet.
It provides an opportunity for the sellers to reach the end of consumer directly without the
involvement of the middlemen1 making the course of transaction faster.

1
Richard Dumcomb, E Commerce For Small Enterprise Development (2006)

1
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

The only essential requirement to validate an electronic contract is compliance with the necessary
pre-requisites provided under the Section 10 of the Indian Contract Act, 1872. Also, various
legislations validates E-Contract as a valid contract in India such as the Information Technology
Act, 20002, Electronic Commerce Act, 1998, Sale of Goods Act, 1930. The Indian Evidence Act,
18723 also gives validity to E-Contracts as it recognizes electronic documents as evidence.

Before the revolution of E-Commerce, Sale of Goods Act, 1930 was exclusively meant for
traditional business transactions, however, in recent times, due to the rapid increase of virtual
business transaction of goods, the said act is applied in order to provide legal sanctity. In order to
establish the relationship between the performance of E-Contract and sale of goods act, the sections
laid down under the performance of the contract must be looked upon.

ANALYSIS

Chapter IV deals with the ‘Performance of the Contract’ under the Sale of Goods Act, 1930, which
ranges from Section 31 to Section 44. Before performing the contract, there are certain duties of
the seller and buyer on the E-Commerce portal that are needed to be perfromed to constitute a
valid E-Contract. Section 314 states that,

“It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in
accordance with the terms of the contract of sale.”

This section emphasizes reciprocity of the promises of duties. The duty of the seller is to deliver
the goods, whether he is the owner or not, and whether he has the possession at the time of contract
of sale or not. The duties of the buyer are to accept the goods and to pay for the same. The words
“in accordance with the terms of the contract of sale” are intended to show that the parties are at
liberty to modify the terms. In absence of a contract to the contrary these duties are concurrent
conditions as stated in the following section. For example, in terms of online shopping, various
payment methods are provided to the buyer/customer to choose at his/her convenience. However,
once that payment method has been chosen by the customer, it is necessary for the customer to
abide by the same.

2
Information Technology Act, 2000, Section 10
3
Indian Evidence Act, Section 65B.
4
Sale of Goods Act, 1930, Section 32

2
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

Delivery of Goods under E-Contracts

In relation to the performance of the contract, delivery of goods form a major component.
Therefore, each and every section that specifies delivery of goods under the Sale of Goods Act has
been analyzed with respect to E-Contracts,

 Section 32, Sale of Goods Act, 1930 – Payment and Delivery are concurrent conditions -
“Unless otherwise agreed, delivery of the goods and payment of the price are concurrent
conditions, that is to say, the seller shall be ready and willing to give possession of the
goods to the buyer in exchange for the price, and the buyer shall be ready and willing to
pay the price in exchange for possession of the goods.”

Ready and Willing - This section says that delivery of the goods and payment of the price are
concurrent conditions, they have to be performed simultaneously, that is to say, the seller must
be ready and willing to give delivery in exchange for the price, and the buyer must be ready
and willing to pay the price in exchange for the possession of the goods. The seller in order to
be ready and willing need not to be in actual possession of good, it is sufficient if he has
control and can cause the delivery of such goods. Section 32 has no relevance to the question
whether there was a contract at all between the parties, but if a contract is shown to exist, the
payment and delivery are concurrent conditions. It pertains to a condition which is to be
implied, unless there is a provision to the contrary, in a contract 5. The section assumes the
existence of a contract in respect of which such a term may or may not be read in.

Unless otherwise agreed - Application of this section towards e-contracts can be explained
through an illustration, A likes a product on B’s website and chose to purchase the same. Here,
A can either opt to pay the price through online banking/card payment or can even opt for
cash on delivery option which is quite popular with people. In either cases, B is bound to
deliver the product to A’s doorstep even if he hasn’t collected the payment. While Section 32
talks about “intentions” of both the parties to perform concurrent conditions, it does not
explain whether it has to be pre-paid or paid on delivery. As a result of which, the term “Unless

5
Claude-Lila Parulekar v. Sakal papers (P) Ltd., 11 SCC 73: AIR 2005 SC 4074

3
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

otherwise agreed” is mentioned in the section, which gives independence to both the parties
to amend policies, procedure to pay etc. and conduct negotiations on the same.

 Section 33, Sale of Goods Act, 1930 – Delivery - “Delivery of goods sold may be made
by doing anything which the parties agree shall be treated as delivery or which has the
effect of putting the goods in the possession of the buyer or of any person authorised to
hold them on his behalf.”
i. Agreement of Delivery by the Parties - The first part of this Section deals with the
mode of delivery. Delivery can be made by doing anything which the parties agree
shall be treated as delivery presents no difficulty. The question is one of the
agreement between the parties, and where a dispute arises the Court is called upon
to ascertain what the agreement between the parties was.

ii. In respect of E-commerce, it can be understood by the given illustration- A

iii. Constructive Delivery - Constructive delivery also operates in the same manner in
E-commerce like it operates in a normal business world. By constructive delivery
we mean that there may be a change in possession of goods without any change in
their actual and visible delivery. In such cases, seller’s possession of goods may
change after the sale and he may no longer hold the goods as owner but may hold
the goods on account of hid buyer or a bailee for a buyer. This was established in
Elmore v. Stone6 where the horse was sold and seller kept it on the request of buyer.
This can only be applied in cases of E-commerce where price for the delivery has
already been paid and not valid on products which are for “cash on delivery”
because till the time seller does not receives the amount, buyer cannot claim his

6
Elmore v. Stone, 127 ER 912

4
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

right on those products. Also, in constructive delivery, both the parties shall agree
to such arrangement and in cases where either party does not approve of it, such
possession may be termed as illegal.

 Section 34, Sale of Goods Act, 1930 - Effect of part delivery – “A delivery of part of
goods, in progress of the delivery of the whole has the same effect, for the purpose of
passing the property in such goods, as a delivery of the whole; but a delivery of part of the
goods, with an intention of severing it from the whole, does not operate as a delivery of
the remainder”.
i. The section is based on the rule of common law which states that “delivery of part
may be a delivery of the whole if it is so intended and agreed but not otherwise and
burden of proof seems to be on party affirming such intention7”
ii. It operates as a constructive delivery only when the delivery of part takes place in
the course of the delivery of the whole. Taking goods from the seller is the
acceptance to the constructive possession of the whole. The other part of this
section deals with the intention of severing the part of goods from whole, it won’t
be termed as complete delivery8
iii. This section can be understood in light of the operations of any E-commerce. For
instance, A places an order of five books from merchant site B. Due to stock delay
and various reasons, A receives three books during first week of placing the order
and other two during the next week. A’s acceptance of first three books signifies
his acceptance through his action that other part delivery is approved. In case he
doesn’t want part deliveries, he has the option of cancelling the order at any point
of time. Also, if B has the intention of severing the deliveries from the whole, he
would be held negligent and may supply only one book at a time out of five which
may attract legal action against him.

7
Per Lord Blackburn in Kemp v. Falk 7 App Cas 573, 586, (1882)
8
Dixon v. Yates, 5 B & AD. 313.339, (1883)

5
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

 Section 35, Sale of Goods Act, 1930 - Buyer to apply for delivery – “Apart from any
express contract, the seller of goods is not bound to deliver them until the buyer applies
for delivery.”
i. This section stated that the buyer has no cause of action against the seller if he has
not applied for delivery, also, he must state that cause of action in his plaint9. The
demand by a third party isn’t valid and in cases where seller provides for notice of
arrival of goods like an invoice, the buyer will be under obligation to apply for the
delivery. This can be understood in reference to the E-commerce as well. Big
companies like Jabong has delivery partners who deliver the products to the
customer, these partners are independent and only act as courier agency. Jabong
has delivery partner Go Javas.
ii. For instance- Mr. A orders a pair of shoes from Jabong and Go Javas collect the
same from their warehouse. Due to some technical fault, delivery could not be
made for several days. Here A has to apply for delivery from Go Javas and cannot
hold Jabong responsible for the delay. However, to maintain the brand image, big
E-commerce giants provides on the spot help in cases of late delivery and related
issues but when it comes to fixing the legal responsibility, Go Javas has bigger
responsibility in that case. Also, when buyer applies for the delivery, it will be
dependent on nature and circumstances of the particular contract as to the time
within which seller is required to comply with buyer’s demand.
iii. Under C.I.F (Cost, Insurance and Freight) it is the duty of the seller to inform buyer
about arrival of his goods at the port destination after which there arises the
obligation of the buyer to apply for the delivery. Same is applied in case of
Ecommerce business which has its establishment in some other country while the
buyer is sitting in his home country, ordering the products.
iv. Seller’s liability is limited till the arrival of the goods to Post Office only and not
beyond it. Another notable point about buyer’s duty is that his duty to apply for
delivery does not arise when seller has refused to perform his part of the contract
without any justification even before the final date of delivery has arrived. This

9
Sivaya v. Ranganayakulu, 37 Bom LR 538 (1935)

6
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

could be the pure case of “anticipatory breach of contract” by the seller and Section
35 has no application when buyer treats the contract as rescinded by the virtue of
Section 60 of this Act10. This clause can be applied to the cases of E-commerce as
well.
 Section 36, Sale of Goods Act, 1930 defines the rules as to the delivery of the goods
ranging from place of the delivery, time for delivery, mode to expenses of such delivery.
i. These sub -sections must be understood in light of E-commerce transactions.
Rules of delivery - Rules of delivery may be varied according to the agreement
between buyer and seller on a website of the seller.
ii. Interpretation of contract - It lays down the question as to whether the buyer has to
apply for possession or the seller has to send the goods to the buyer, this question
is based on the basis of construction of each contract depending upon the facts and
circumstances. Usually in cases of E-commerce, it is the seller who sends the goods
to the buyer after receiving the order.
iii. Place of delivery under E-commerce transactions come under express contract.
The goods are delivered to the buyer from the place where they were lying like
warehouse of the company. The given Section is silent on the mode of delivery of
the products and any reasonable mode can be adopted by the company.
iv. Time of Delivery - Sub-section (2) deals with the time for delivery and says that
seller is bound to deliver the goods within a reasonable time and where time is
fixed, seller has to follow the time limit. It could depend on number of reasons
like- nature of goods, transport facilities and related issues. In case the time period
lapses; it will be breach of contract. Also, there are few other E-commerce
companies like Alibaba and Ebay who asks for bigger time window which may
extend till one month due to the location of their businesses and it is up to the buyer
to agree on it or not. In case buyer feel that time factor is not being followed, he is
free to rescind the contract (cancel the order in case of E-commerce) but not before
providing the previous notice to the seller for the same.

10
Devilal v. Govindlal, AIR 1961 Raj. 283

7
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

These Sections are sufficient to establish accountability when the question of e-contracts arises.
Without these provisions, it would be impossible to give legal anctity to the world of virtual
business.

Issue of Section 41 under E-Commerce –Misrepresentation

Section 41, Sale of Goods Act, 1930 – Buyer’s right to examining the goods – “(1) Where goods
are delivered to the buyer which he has not previously examined, he is not deemed to have accepted
them unless and until he has had a reasonable opportunity of examining them for the purpose of
ascertaining whether they are in conformity with the contract.”

“(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound,
on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose
of ascertaining whether they are in conformity with the contract.”

In the case of E-Commerce, this right that is given to the buyer to examine the goods before
purchasing under the said act is absent. In a brick and mortar showroom the buyer has the option
of examining the product he/she buys and assuring himself/ herself of the quality of the product
by touch and hence chances of being misled by the seller are few. The principle of ‘Caveat Emptor’
is strictly applicable in brick and mortar world. However, in the case of online transaction where
a purchaser is at a disadvantage and is not in a position to actually verify the quality of the product
he/ she is buying, it is next to impossible to strictly apply the principle of ‘Caveat Emptor’.
Therefore, the newly emerged doctrine in the era of Human Rights of consumers ‘Caveat Venditor’
must strictly adhere to in online transactions. Although, there are remedies available to the buyers
of E-Commerce in which they can apply for refund or return of the goods and consumer courts
can also be approached to seek compensation. However, there is a need of reform that would
address this issue.

Conclusion

In this ever expanding world of E-commerce, we need various legal tools to implement legality of
this business. We have to make sure that rights of both buyers and sellers are not infringed due to
lack of clarity or unavailability of legal norms at place. Sale of Goods Act, 1930 addresses some
of the issues of e-contracts and chapter IV of it can easily be linked to the business of E-commerce

8
 INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

to provide legal sanctity. There are various legislations that protects the operations of E-Commerce
directly or indirectly ranging from Information Technology Act, 2000 to Sale of Goods Act, 1930.
However, at present, with the increase in number of internet users, e-contracts are organized to
grow further. The growing trend of internet banking and credit or debit cards along with the rise
in the number of educated and computer literate persons will further support this growth. The need
of the hour is law which covers all the aspects of e-contract extending from payment mechanism
and maintaining minimum standards in the delivery of services. For example, as discussed in the
article, Section 41 of Sale of Goods Act, 1930 cannot be applied to E-Contracts which deals with
the right to examine the goods before purchasing them, however, such operation is not possible in
case of e-contracts. The Electronic Commerce (EC Directive) Regulation 2002 under European
Union addresses several issues faced in the performance of e-contracts, even such issues that
consists of minor technicalities. In India, we may have a separate legislation called The Electronic
Commerce Act, 1998, but with just 15 sections, it does not address the complexities of E-Contracts.
A law in this field will detect the criminals who have used the internet as a source for making quick
money. This will also act a defense for the genuine e-contract websites and help in further growing
of business. There is also a need for the creation of an authority in the consumer court to look into
the grievances arising out of e-contract transactions.

Such an authority should have experts in area such as payment security. This will embolden speedy
redressal of disputes and promote e-contract transactions.

BIBLIOGRAPHY

 Sir Dinshah Fardunji Mulla, The Sale of Good Act and Indian Partnership Act, 10th ed,
2012
 Prof. Gagandeep, LEGAL VALIDITY OF E-CONTRACTS: A STUDY WITH SPECIAL
REFERNCE TO CONSUMER CONTRACTS IN ONLINE SHOPPING, JOURNAL ON
CONTEMPORARY ISSUES OF LAW VOLUME 3 ISSUE 9.
 Richard Dumcomb, E Commerce For Small Enterprise Development, 2nd ed, 2006
 The Sale of Goods Act, 1930, Bare Act, Universal Law Publications.

9
INTERNAL ASSESSMENT III – SPECIAL CONTRACTS

10