Sale Agreement contains terms and conditions agreed to between the buyer and the seller for effecting the sale.
When the buyer or the seller acts in violation of these terms and conditions or does not act or refuses to act as required, there is a breach of sale agreement. There can be numerous examples of such breach such as:
- Payment not made in stipulated time
- Delivery of product not made as promised
- Seller refuses to repair within the warranty period
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Options with the party when other party breaches the sale agreement:
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When one party violates the sale agreement, the other party may give notice to the defaulting party to act as per agreed term. If the defaulting party fails to perform, the other party can
- Cancel the sale agreement – as per the cancellation clause of the agreement, if any or through the court
- Approach the court seeking directions to the defaulting party to perform as per the agreement – suit for performance
- Approach the court to direct the defaulting party to compensate for the loss/damages caused to the party by the defaulting party – suit for damages
- Ask for a refund of the advance payment made to the defaulting party – suit for the price
- Retain the advance payment made by the defaulting party
- Seek directions from court if warranty clause benefits not provided by the seller- suit for breach of warranty
Depending upon the nature of the agreement and its terms and conditions, all or any of the remedies mentioned above can be availed. It is the discretion of the court to grant a specific remedy as per law.
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Specific remedies – (Governed by Indian Contract Act and Sales of Goods Act)
Remedies of Seller against buyer:
- When the buyer refuses to pay – seller can file a suit for payment
- When the buyer refuses to accept the goods – seller can file a lawsuit for damages, i.e. seller can recover loss caused to him based on the market price of the goods. The amount taken for calculating the loss is the price existing on the date of delivery of goods.
Remedies of Buyer against seller:
- When the seller refuses to deliver – the buyer can file a suit for loss/damages caused to him by non- delivery of the product
- When there is a breach of warranty by the seller-buyer can file a suit for recovery of purchase price or can seek damages. Buyer can also reject the goods but not always.
Remedy to seek interest for the loss – It is available both to the seller and the buyer to recover interest on the monetary loss, especially in suits for recovery of price. It is the discretion of the court to allow or not.
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Remedy if before the performance as per the agreement, one party clears its intention not to perform – Here the non-defaulting party can either consider it as a breach of the agreement and seek proper remedy or can wait for the defaulting party to perform on the due date.
If the buyer is in breach, the seller can
- cancel the agreement
- sue for damages
- sue for price
- Sue for claiming the goods if they are in possession of the buyer.
If the seller is in breach, the buyer can
- Cancel the agreement
- Sue for damages
- Sue for performance
- Reject the goods when delivered by seller if they are not in conformity with the agreed terms
Agreements are meant to be performed. The parties, however, are free to provide remedies in the agreement itself in case one party fails to perform its obligations. The remedies can be:
- Cancellation Clause
- Notice to be given or not
- Advance to be retained or returned
- Compensation/Damages –payment