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

Ramesh agrees to sell a bale of cotton lying in his Nagpur warehouse to Dinesh. Unknown to both, the bale was destroyed by fire the previous night. What is the legal position under the Sale of Goods Act, 1930?

The contract is void. When there is a contract for the sale of specific goods and, without the seller's knowledge, the goods have already perished when the contract is made, the agreement is void under the Sale of Goods Act.

  1. AThe contract is valid and Ramesh must supply a similar bale
  2. BThe contract is void because the goods had perished before the agreement was madeCorrect
  3. CThe contract is voidable at Ramesh's option
  4. DThe contract is valid but Dinesh must bear the loss

Explanation

Where specific goods have, without the seller's knowledge, perished at the time the contract is made, the agreement is void. Both parties were unaware of the fire, so the rule on goods perishing before sale applies. The contract is not merely voidable, and Dinesh does not bear the loss.

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