Effect of Destruction of Goods

A contract of sale becomes void on the destruction of goods. We can study the effect of destruction of goods under following two heads.

1. Goods perishing before making of the contract: Sometimes, the goods might have perished before making of the contract of sale. In such a situation the contract of sale is void. Section 7 of the Act provides that a contract for the sale of specific goods is void, if at the time when the contract was made, the goods have without the knowledge of the seller, perished or become so damaged as no longer answer to their description in the contract.




This is based on the principle of impossibility of performance of the contract. Thus, the contract of sale shall be void on the destruction of goods, if the following conditions are satisfied:

a) It must be a contract of sale for specific goods;

b) The goods must have perished before making of the contract; and

c) The seller must not be aware about the destruction of goods.

 

Examples

i) A agrees to sell a horse to B. Unknown to both the parties, the horse was dead at the time of making the contract. This contract of ‘sale is void.

ii) A agrees to sell 1,000 bags of sugar coming on a particular ship. On arrival of the ship, it is discovered that because of sea water entering the cabin the sugar had become syrup (sharbat). The contract is void as the goods no longer answer to their description.

Sometimes, only part of the goods may be destroyed. In such a situation, the deciding factor would be whether the contract is divisible or indivisible. If the contract is divisible and only a part of the goods is lost, then the contract remains valid for the part which is in good condition. In Barrow Lane & Ballard v. Philips, A agreed to sell to B a parcel of 700 bags of groundnuts lying in his godown. Unknown to A, 109 bags had been stolen at the time of the contract. A, therefore, tendered delivery of the parcel containing 591 bags. It was held that the contract had become void and B cannot be compelled to accept 591 bags because the contract was indivisible.

 

2. Goods perishing before sale but after agreement to sell: It is also possible that the goods might perish after an agreement to sell is made but before it becomes a sale. In this connection Section 8 of the Act provides that in an agreement to sell specific goods, the agreement becomes void if the goods are destroyed without any fault of the seller or the buyer. This rule is based on the fact that it was only an agreement to sell and the goods were lost before the passing of the risk.

In Elphic v. Barnes, a horse was delivered on trial for eight days. However, the horse died on the third day, without any fault of either the seller or buyer. It was held that this agreement is void and the seller could not recover the price from the buyer. You should note that Section 7 and 8 are applicable only in case of specific goods. Therefore, if unascertained goods are destroyed either before or after making the agreement, the contract shall not become void. Thus, in an agreement to sell unascertained goods, even if the entire stock of goods is destroyed, the contract shall not become void and the seller will have to perform his promise. For example, A agreed to sell to B 100 bags of wheat from his stock of 1,000 bags in his godown. The entire stock was destroyed by fire. A is bound to deliver 100 bags of wheat or else he will be liable for damages.

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