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CMA Intermediate · Business Laws and Ethics · Sale of Goods Act, 1930

Meena Textiles agreed to sell to Rohan Traders a specific lot of 500 bales lying in its godown. Before the risk passed to the buyer, a fire without fault of either party destroyed the whole lot. What is the legal position?

The agreement is avoided. Where specific goods perish without any fault of seller or buyer after an agreement to sell but before the risk passes to the buyer, the Sale of Goods Act, 1930 treats the agreement as void, so neither party is liable.

  1. AThe agreement is avoidedCorrect
  2. BMeena Textiles must supply 500 similar bales from the market
  3. CRohan Traders must still pay the price because the contract was concluded
  4. DRohan Traders may sue Meena Textiles for damages for non-delivery

Explanation

Section 8 provides that where specific goods perish without fault of seller or buyer before the risk passes to the buyer, the agreement to sell is thereby avoided. Neither party is liable, so the other options are wrong, as they assume the contract continues.

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