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

Nisha, a seller in Chennai, contracted to sell 200 bags of rice to Aman, delivery in two equal instalments, each to be separately paid for. Nisha delivered the first instalment, but the rice was of inferior quality, and Aman rejected it. Aman then refused to take the second instalment. Nisha says that this is an instalment contract and Aman must take the remaining part. What is the correct position, assuming nothing else in the contract?

In an instalment contract with separate payments, a defective instalment does not automatically force the buyer to accept the rest, nor automatically end the contract. Whether it is repudiation of the whole or a severable breach depends on the contract terms and the circumstances, so Aman is not automatically bound.

  1. AAman is bound to accept the second instalment since he cannot reject any instalment
  2. BAman may treat the whole contract as repudiated or as severable, depending on the terms and circumstances of the breach, and is not automatically bound to take the second instalmentCorrect
  3. CAman may refuse and also demand return of the price of the second instalment
  4. DThe contract is void because delivery was in instalments

Explanation

Where goods are to be delivered in separate instalments paid for separately and the seller makes defective delivery of one, whether the breach is a repudiation of the whole or only a severable claim for compensation depends on the contract terms and circumstances, such as the ratio of the breach to the whole and the likelihood of repetition. So Aman is not automatically bound to take the second instalment, and nothing says he has paid for it.

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