Source: RTP,June20225 Marks
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Question Scenario

A went to B’s shop and selected some jewellery. He falsely represented himself to be a man of credit and thereby persuaded B to take the payment by cheque. He further requested him to hand over the particular type of ring immediately. On the due date, when the seller, B presented the cheque for payment, the cheque was found to be dishonoured. Before B could avoid the contract on the ground of fraud by A, he had sold the ring to C. C had taken the ring in good faith and without any notice of the fact that the goods with A were under a voidable contract. Discuss if such a sale made by non-owner is valid or not as per the provisions of Sale of Goods Act, 1930?

Estimated Writing Time: 9 mins Try in Practice Mode

Suggested Answer

1. Provisions of the Act / Applicable Law

Section 27 of Sale of Goods Act, 1930 states that no man can sell the goods and give a good title unless he is the owner of the goods. However, there are certain exceptions to this rule of transfer of title of goods.

One of the exceptions is sale by person in possession under a voidable contract (Section 29 of Sale of Goods Act, 1930)

2. The contract has not been rescinded or avoided so far

Then, such a sale by a person who has possession of goods under a voidable contract shall amount to a valid sale and the buyer gets the better title.

2. Analysis & Application of Facts

1. If a person has possession of goods under a voidable contract

3. The person having possession sells it to a buyer

4. The buyer acts in good faith

5.. The buyer has no knowledge that the seller has no right to sell.

3. Conclusion & Verdict

Based on the provisions, Mr. A is in possession of the ring under a voidable contract as per provisions of Indian Contract Act, 1872. Also, B has not rescinded or avoided the contract, Mr. A is in possession of the ring and he sells it new buyer Mr. C who acts in good faith and has no knowledge that A is not the real owner. Since all the conditions of Section 29 of Sale of Goods Act, 1930 are fulfilled, therefore sale of ring made by Mr. A to Mr. C is a valid sale.

Exam Strategy Tip

When answering law questions in the CA Foundation exam, follow the "Provision -> Facts -> Conclusion" structure for maximum marks. Ensure to state the relevant sections where applicable to earn bonus marks from the evaluator.

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