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CA Foundation · Business Laws · The Sale of Goods Act, 1930

Kavya contracts to buy 300 bags of sugar from Ramesh Sugars, delivery in three equal lots of 100 bags, each lot to be paid for separately. Ramesh delivers the first lot, Kavya pays, but Ramesh then fails to deliver the second lot. Which statement is correct?

In an instalment contract with separate payments, a default in one lot may repudiate the whole contract or give only a claim for damages for that lot. It depends on the contract terms and the circumstances, so Kavya need not return the first lot automatically.

  1. AThe breach by Ramesh as to the second lot may be treated as a repudiation of the whole contract or as a severable breach, depending on the circumstances and the contract's termsCorrect
  2. BKavya must return the first lot, since the contract is indivisible by law
  3. CKavya may keep the first lot and claim nothing for the second lot
  4. DThe contract ends automatically and no damages can be claimed

Explanation

This is an instalment contract with separate payment for each lot. Whether a default in one instalment repudiates the whole contract or gives only a claim for damages depends on the terms, and on how serious the breach is and how likely it is to recur. The other options impose fixed outcomes that the Act does not provide.

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