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

Sharma agreed to sell to Iyer a specific machine lying in his factory. Unknown to Sharma, a fire had destroyed the machine the previous night, before the contract was made. What is the legal position?

The contract is void. Under Section 7, where specific goods have perished at the time of contract without the seller's knowledge, the contract of sale is void, so neither party can enforce it. It is not merely voidable.

  1. AThe contract is valid and Sharma must pay damages
  2. BThe contract is voidable at Iyer's option only
  3. CThe contract is void as the specific goods had perished at the time of contract without the seller's knowledgeCorrect
  4. DThe contract is valid but the price is reduced

Explanation

Section 7 makes a contract for the sale of specific goods void if, without the seller's knowledge, the goods have perished at the time the contract was made. Here the machine was destroyed before the contract and Sharma did not know. It is void, not voidable.

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