Section 55 of the Indian Sale of Goods Act: Exhaustive or Illustrative?

There are often practical advantages in being able
to sue for an agreed sum instead of damages, because the amount the claimant
recovers in an action for the sum is usually not reduced by the application of legal
rules such as mitigation and remoteness. For example, suppose an advertiser
signs a contract with a television company to advertise its products for a fee
of Rs. 1 crore, provides the text of the advertisement and decides a month
before the date of advertisement that it no longer wishes to proceed with the
contract. If the television company brings a claim for damages, it will only
recover the difference between Rs. 1 crore and the market value of an
alternative advertising contract on the appropriate date (whether it actually
made one or not). If, on the other hand, it displays the advertisement and sues
for the price, mitigation and remoteness are generally irrelevant. One of the
most common examples of the action for the agreed sum is the action by a seller
of goods for the price, which is now a statutory remedy under section 55(1) of
the Sale of Goods Act, 1930. The many restrictions on the grant of specific
performance (adequacy of damages, constant supervision etc) and damages do not
apply to a claim under this provision (see, eg, the Bombay High Court’s
decision in Vithaldas Vishram).

But section 55(1) only allows the seller to sue for
the price in one of two circumstances:

55. Suit for price.—(1)
Where under a contract of sale the property
in the goods has passed to the buyer
and the buyer wrongfully neglects or refuses to pay for the goods according to
the terms of the contract, the seller may sue him for the price of the goods.

(2) Where under a contract of sale the price is
payable on a day certain irrespective of
delivery
and the buyer wrongfully neglects or refuses to pay such price,
the seller may sue him for the price although the property in the goods has not
passed and the goods have not been appropriated to the contract.

An important question, therefore, is whether the seller
can sue for the agreed sum (provided it has accrued) even when s 55 does not apply. The issue is of some commercial
importance because, where sellers, as they commonly do, use a Romalpa clause, property will not pass
to the buyer if the sum is not paid and therefore s 55(1) will either be
unavailable (as title will not have passed prior to payment) or unnecessary (as
payment would have been made). In its important judgment in FG Wilson v John
Holt
, the Court of Appeal has recently considered this question and
granted leave to appeal to the Supreme Court on certain related points.

FG Wilson had entered into a distributorship
agreement with John Holt, its distributor, to sell generator sets. The contract
contained a ‘no set-off’ clause meaning that John Holt could not set off
any claim it might have against Wilson against the price of the goods.
John Holt claimed that Wilson was in breach of the Distributorship Agreement
and instituted an action in the Commercial Court to recover damages. Wilson
claimed that John Holt had failed to pay $12m, representing the price of
generator sets delivered to it. The Distributorship Agreement contained a Romalpa clause which meant that FG
Wilson retained title until it received payment. If FG Wilson’s action was for
the price, the no set-off clause
would apply, but not otherwise. FG Wilson said that its action was for the
price despite the Romalpa clause
because: (i) title passed when (or
immediately before) John Holt ‘sold’ the generators to its buyers in Nigeria,
thereby attracting section 49(1) of the English Act (section 55(1) of the Indian
Act); or (ii) it was entitled to sue
for the price even if section 49(1) is not satisfied, if the price has accrued
under the contract, as in this case it undoubtedly had.

The Court of Appeal was divided on (i), which is a point of construction. Longmore
LJ, who dissented on this point, held that the contract, in allowing John Holt
to re-sell ‘in the ordinary course of business’, demonstrated that title must
have passed to John Holt at the time of (or immediately before) the re-sale. In
his view, section 49(1) was available. Patten LJ, with whom Floyd LJ agreed,
held that John Holt transferred the generators to its Nigerian sub-buyer as FG Wilson’s agent, so that title never
passed from FG Wilson to John Holt, the latter being obliged to account for the
proceeds of sale to the former. In view of the majority’s finding, section
49(1) was unavailable (as title had not passed) and section 49(2) did not apply
either (the seller did not attempt to argue it did). The Court of Appeal held
unanimously that a seller cannot sue for the price independently of
section 49, with the result that FG Wilson’s claim was not one for the price
(and the no set-off clause did not therefore apply). At first sight, this
appears to be an uncommercial result, because it means that a seller who has
taken care to protect himself by a Romalpa clause now loses the ability to sue
for the price. However, as Longmore LJ points, all the seller needs to do
(which FG Wilson had failed to do) to retain his ability to sue for the price is
to stipulate that the price is payable on a ‘day certain’ so that section 49(2)
applies although there is a Romalpa clause.

It is no doubt true that retention of
title clauses were less common in 1893 than they are today.  But if a seller is happy to allow a buyer use
of the goods without paying for them but wishes to ensure that he retains
property in the goods and that he can sue for the price, he only has to provide
for payment to be due on a day certain. 
That is what one would usually expect a seller to do; indeed that is
what FG Wilson’s terms and conditions do under the heading Prices and Payments
where it is provided that the Buyer is to pay within 30 days of the date of the
invoice.  It is only the subsequent variations
that have muddied the waters.
           
Is this also the law in India, for the purposes of
section 55 of the 1930 Act? One—ultimately unpersuasive—argument in favour of
the seller being able sue independently of section 55 is that provision merely
codifies the common law. Indeed, although the predecessor to the 1930 Act (Chapter 7 of the Contract
Act, 1872) did not contain any provision corresponding to s 55(1), the courts
recognised that a seller could sue for the sum (see, eg, Chowdhry v Poddar).
However, the English Sale of Goods Act, 1893, on which the 1930 Act is based
and which was also an attempt by Sir Mackenzie Chalmers to codify the common
law, only permitted the seller to sue for the sum only in these two
circumstances, and one may ask why Parliament should single out two instances
if the seller can in any event sue for the price. Moreover, as Longmore LJ points
out in FG Wilson,
the pre-1893 (in India, pre-1930) common law itself probably allowed a seller
to bring an action for the price only if title had passed. Two indebitatus counts were available to the
seller for this purpose: ‘goods bargained and sold’ and ‘goods sold and
delivered’, which correspond respectively to sub-sections (1) and (2) of section
49 of the English and section 53 of the Indian Acts. As Longmore LJ explains:

Section 49(1) and (2) first appeared in the 1893
Sale of Goods Act but I doubt if Sir Mackenzie Chalmers would accept that
criticism (ie Sir Roy Goode’s comment
that section 49 was an example of ‘faulty drafting
’).  In 1893 it was axiomatic that a seller could
not sue for the price unless property in the goods had passed  …
All this was regarded as
straightforward in Scott v England (1844) 14 LJQB 43 and in the
commentary on the old common indebitatus count for goods bargained and sold in
Bullen and Leake’s Precedents of Pleadings (3rd ed. 1868)
pages 39-40.

This was also the view of McCardie J in Colley v Overseas
Exporters
, where a leather merchant at Sheffield agreed to sell leather
to the buyer, FOB Liverpool, for shipment on the Kenuta. When the Kenuta was
withdrawn by the owners, the buyer (in breach of contract) failed to name a
replacement ship and title did not pass. The seller said that he could
nevertheless sue for the price. McCardie J rejected this contention because—unless
one wishes to adopt the ‘fiction of fulfilment’ which is not part of English
law although the position is less clear in India—title did not pass and neither
the pre-1893 common law nor the 1893 (and therefore the 1930 and 1979) Acts
allowed the seller to sue in the absence of the passing of title.

It therefore appears that the position in India is
exactly the same. But it is clear that this is a difficult issue, with
respectable arguments for both positions, particularly because, as Longmore LJ
recognises at [56], the Court of Appeal’s view means that the seller can sue
for neither the price nor for damages
should the contract contain a Romalpa clause.

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V. Niranjan

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