Unpaid seller, Rights of unpaid seller.

Q. Who is an ‘unpaid seller’ what are his rights against the goods? Explain under what circumstances such rights can be exercised by him. (2000)
Q. Write an un-paid seller’s right of stoppage of goods in transit. Indicate the circumstances which determine the duration of transit and how stoppage in transit is effected. (2002)

    Introduction:
Unpaid seller means a person who has sold the good for a price but price has not been paid to him unpaid seller has rights against the goods and buyer.

    Definition of unpaid seller:

According to Sec 45, the seller of goods is deemed to be an unpaid seller.
(i) When the whole of the price has not paid or tendered.
(ii) When a bill of exchange or other negotiable instrument has been received as a condition payment, and the condition on which it has been received remains unfulfilled by reason of dishonor of the instrument or other wise.

    Features of unpaid seller:

Following are the features of unpaid seller.
(i) He must sells the goods on cash basis and must be unpaid.
(ii) He must be unpaid either wholly or partly.
(iii) If the price is paid through a bill of exchange or other negotiable instruments, the same must be dishonoured.
(iv) He must not refuse to accept the payment when tendered.

 Rights of unpaid seller:

(i) Rights of unpaid seller against goods.
(ii) Rights of unpaid seller against the buyer.
(I) Right of un paid seller against the goods:
Against the goods the unpaid seller has the following. Rights.

(a) Right of lien:

Lien is the right to retain possession and refuse to deliver them to the buyer until the price due in respect of them is paid to the buyer.
Circumstances when right can be exercised:
Following are the circumstances when right of lien can be exercised.

(i) Where the goods have been sold without any stipulation.
(ii) Where the goods have been sold on credit, but the term of the credit has expired.
(iii) Where the buyer becomes insolvent, even though the period of credit may not have yet expired.

Termination of right of lien:

Under the following circumstances unpaid seller loses his right of lien.
(i) When he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of goods.
(ii) When the possession of goods is obtained lawfully by the buyer or his agent.
(iii) When the seller waives his right of lien on goods.
(iv) When buyer further sells the goods.

(b) Right of stoppage of goods in transit:

Unpaid seller has right to stope the goods in transit.
Conditions:
Following are the conditions
(i) The seller must be unpaid.
(ii) Goods must be in transit.
(iii) Property has passed to the buyer.
(iv) Buyer is insolvent.
Modes of stoppage:
Following are the modes of stoppage:
(i) By taking possession of the goods.
(ii) By giving notice of his claim to the carried or other bailee in whose possession the goods are
(c) Right of resale:
Unpaid seller can resale the goods:
Conditions:
(a) Goods should be of perishable nature.
(b) Right of resale should be expressed in contract.
(c) Buyer has not paid.
(d) Buyer has received the notice from seller.
(II) Rights of unpaid seller against buyer:
He has right against buyer and have following remedies.
(i) Suit for price:
Where property has passed to the buyer, and the buyer wrongfully refuses or neglect to pay for the goods, the seller may sue him for the price of the goods.
(ii) Suit for repudiation:
If buyer repudiates the contract before the date of the delivery the seller may treat the contract as subsisting and wait till the date of delivery or may tread the contract as rescinded and sue for damages for breach.
(iii) Suit for damages for non-acceptance:
If buyer refused to accept and pay for the goods the seller has right to sue for damages for non-acceptance.
(iv) Suit for interest and special damages:
Unpaid seller can recover the interest on the unpaid price. He can also sue for special damages.

5. Conclusion:

To conclusion it can be said that, unpaid seller under sale of goods. Act is a person who has not been paid. He has rights the goods sold and against the buyer. He can exercise right of stoppage of goods in transit under some circumstances.



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2I.

 

Where the goods have been sold on the cash basis.II.

 

Where the goods have been sold on credit basis and the term of credit has expired.III.

 

Where the buyer has become insolvent even if the period of credit has not been expired.Other rules to satisfy the conditions for this right areI.

 

The unpaid seller must be in actual possession of the goods sold.II.

 

It can be exercised even If the documents of title have been delivered to the buyer.III.

 

It can be exercised for the price and not for other expensesIV.

 

If the seller delivers some goods, it can be exercised on the remaining.

Termination of right of lien

Seller’s right of lien is terminated in following cases.I.

 

When he delivers the goods to the carrier or other bailey for transmission to the buyerII.

 

When the buyer or his agent lawfully obtains the possession of the goodsIII.

 

When seller waives his right of lien on the goodsIV.

 

The right of lien once lost will not be restoredV.

 

When the buyer further sells the goods and the seller agreesExample:A seller “S” sells a TV set to “B” and delivers it to “B” and since the TV set was not functioning properly,“B” delivered it back to “S” for the repairs. It was held that “S” can not exercise his right of lien over TVset.

Right of stoppage of goods in transit 

It means stoppage of goods while they are in transit to take possession until the price is paid (sec. 50-52)Unpaid seller can stop the goods in transit in the following cases.I.

 

While the buyer becomes insolventII.

 

While the goods are out of actual possession of seller, but have not reached buyer’s possessioni.e. goods are in transit with career.III.

 

The unpaid seller can stop the goods in transit only for payment of the price of the goods andnot for any other charges.

The unpaid seller can not stop goods in transit in following cases.

I.

 

When the goods reaches the destination.II.

 

While the buyer or his agent takes possession of delivery even if it is not reached destination.III.

 

In case the carrier is agent of the buyer, the transit comes to an end the instance carrier receivesthe goods and seller can not stop the transitionIV.

 

Carrier’s wrongful refusal to deliver goods to the buyer.Example:

 

3“A” sells TV set to “B”. “A” delivers the TV to the carrier to carry it to “B”. Later on gets news that “B”has become insolvent; “A” can stop delivery.

Right of resale

If a buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to resellthe goods in the following circumstances.a)

 

Where the goods are of perishable nature.b)

 

Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a noticeto buyer of his intension of resell the goods.c)

 

Where the unpaid seller has expressly reserved his right of resale.d)

 

Where seller gives notice to the buyer of his intension to resell and the buyer does not paywithin a reasonable time, he cana.

 

Recover loss on resale of the goods, if anyb.

 

Retain any surplus on resale of goods, if anyHowever if the seller sells with out the notice to the buyer, he can nota.

 

Recover any loss of the goods, if anyb.

 

Retain any surplus on the resale of the goods, if anyExample:a)

 

“X” sells vegetable to “Y” on credit, “Y” does not pay, “X” can resell to any other person.b)

 

“M” sells 100 blankets to “N” and gives him one week for payment. “N” does not pay. “M” canresell those to any other person.

Rights against the buyer personally

The unpaid seller has following rights against the buyer

Suit for price

Where ownership of the goods has passed to the buyer and the buyer refuses to pay the price accordingto the terms of the contract, the seller can sue the buyer for price, irrespective of delivery of the goods.(Sec. 55)Example:

Suit for damages for non-delivery

Where the buyer refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. The seller can recover damages only and not the full price (Sec. 56)Example:

 

 

 

 

 

 

 

 

 

 

 

 

 

importance of cost accounting

 The importance of cost accounting is as follows:

• Importance to ManagementCost accounting provides invaluable help to management. It is difficult to indicate where the work of cost accountant ends and managerial control begins. The advantages are as follows:
  
  • Helps in ascertainment of costCost accounting helps the management in the ascertainment of cost of process, product, Job, contract, activity, etc., by using different techniques such as Job costing and Process costing.
  • Aids in Price fixationBy using demand and supply, activities of competitors, market condition to a great extent, also determine the price of product and cost to the producer does play an important role. The producer can take necessary help from his costing records.
  • Helps in Cost reductionCost can be reduced in the long-run when cost reduction programme and improved methods are tried to reduce costs.
  • Elimination of wastageAs it is possible to know the cost of product at every stage, it becomes possible to check the forms of waste, such as time and expenses etc., are in the use of machine equipment and material.
  • Helps in identifying unprofitable activitiesWith the help of cost accounting the unprofitable activities are identified, so that the necessary correct action may be taken.
  • Helps in checking the accuracy of financial accountCost accounting helps in checking the accuracy of financial account with the help of reconciliation of the profit as per financial accounts with the profit as per cost account.
  • Helps in fixing selling PricesIt helps the management in fixing selling prices of product by providing detailed cost information.
• Importance to EmployeesWorker and employees have an interest in which they are employed. An efficient costing system benefits employees through incentives plan in their enterprise, etc. As a result both the productivity and earning capacity increases.
• Cost accounting and creditorsSuppliers, investor’s financial institution and other moneylenders have a stake in the success of the business concern and therefore are benefited by installation of an efficient costing system. They can base their judgement about the profitability and prospects of the enterprise upon the studies and reports submitted by the cost accountant.
• Importance to National EconomyAn efficient costing system benefits national economy by stepping up the government revenue by achieving higher production. The overall economic developments of a country take place due to efficiency of production.
• Data Base for operating policyCost Accounting offers a thoroughly analysed cost data which forms the basis of formulating policy regarding day to day business.

 

 

VOID AGREEMENTS

VOID AGREEMENTS

DEFINITION:

Literally: Void means having no legal value and agreement means Arrangement, promise or contract made with somebody.  So void agreement means an agreement that has no legal value.

Traditionally: “An agreement not enforceable by law is said to be void”. [Sec 2(g)]

LEGAL POSITION

A void agreement has no legal effect. An agreement which does not satisfy the essential elements of contract is void. Void agreement confers no rights on any person and creates no obligations.

Example of void agreement: An agreement made by a minor, agreement without consideration, certain agreements against public policy etc.

EXPRESSLY DECLARED VOID AGREEMENT
There are certain agreements, which are expressly declared to be void.
They are as follows:
(1)       Agreement by incompetent persons
(2)      Agreement of which the consideration or object is unlawful[Sec(23)]
(3)      Agreement made under a bilateral  mistake of fact material to the agreement[Sec(20)]
(4)      Agreement of which the consideration or object is unlawful in part. [Sec(24)]
(5)      Agreement made. without consideration.[Sec(25)]
(6)      Agreement in restraint of marriage [Sec(26)]
(7)      Agreement in restrain of trade  [Sec(27)]
(8)      Agreement  in restrain of legal proceedings[Sec(28)]
(9)      Agreements the meaning of which is uncertain [Sec(29)]
(10)    Agreements by way of wager [Sec(30)]
(11)    Agreements contingent on impossible events [Sec(36)]
(12)    Agreements to do impossible acts [Sec(56)]

Some discussions on void agreement are as follows:
(1) Agreement by incompetent persons.


(2) Agreement Made Without Consideration-
An agreement made without consideration is void, unless it is expressed in writing and registered under the law  for the registration of(documents), and
 1)  It is made on account of natural love and affection between parties standing in a near relation to each other.
2)    It is a promise to compensate, past voluntarily services done for the promisor.
3)    It is a promise to pay time barred debts under limitation act.
In any of these cases, such an agreement is a contract.
Illustrations
a)    A promises for no consideration, to give to B Rs. 1000; this is a void agreement.
b)    A, for natural, love and affection, promises to give his son, B Rs. 1000. A puts his promise to B into writing and registers it. This is a contract.
c)    A finds be B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.
d)    A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.

(3) Agreements in Restraint of Marriage-
 Every individual enjoys the freedom to marry and so according to section 26 of the contract act “every agreement is restraint of the marriage of any person, other than a minor, is void.”
It is interesting to note that a promise to marry a particular person is a valid contract.

Illustrations 
(a)    A agrees with B for good consideration that she will not marry C. It is a void agreement.
(b)    A agrees with B that she will marry him only; it is a valid contract of marriage.  

(4) Agreement in Restraint of Trade-
The constitution of Pakitan guarantees that the freedom of trade and commerce to every citizen and therefore section 27 declares “every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.”
It is to be noted that whether restraint is responsible or not, if it is in the nature of restraint of trade, the agreement is void always, subject to certain exceptions provided for statutorily.

Illustration
An agreement whereby one of the parties agrees to close his business in consideration of the promise by the other party to pay a certain some of money , is void, being an agreement is restraint of trade, and the amount is not recoverable, if the other party fails to pay the promised some of money. (Mad hub Chander vs.  Raj Kumar).

Following are  exceptions of section 27 application.

• Sale of business goodwill.
• 
  

(5) Agreement in restraint of legal proceedings-
Every agreement, by which any party thereto is restricted absolutely from enforcing his right under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. Section 28 declares the following two kinds of agreements void:
(a)    An agreement by which a party is restrained absolutely from taking usual legal
Proceeding, in respect of any rights arising from a contract.
(b)    An agreement which limits the time within which one may enforce his contract
Rights, without to the time allowed by the limitation act.

Illustration
In a contract of fire insurance, it was provided that if a claim is rejected and a suit is not filed within three months after such rejection, all benefits under the policy shell be forfeited. The provision was held valid and binding and the suit filed after three months was dismissed. (Baroda spinning Ltd. vs. Satyanarayan Marine and Fire Ins. Com. Ltd.)

Exception 1: This section shell not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shell be referred to arbitration and that only the amount awarded in such arbitration shell be recoverable in respect of the dispute so referred.

Exception 2: Nor shell this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.

(6) Uncertain Agreements-
“Agreements, the meaning of which is not certain, or capable of being made certain, are void” (Sec-29). Through Sec-29 the law aims to ensure that the parties to a contract should be aware of the precise nature and scope of their mutual rights and obligation under the contract. Thus, if the word used by the parties are or indefinite, the law cannot enforce the agreement.

Illustration
(a)    A agrees to sell to B “a hundred tons of oil.” There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b)    A who is dealer in coconut oil only, agrees to sell to B “a hundred tons if oil.” The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract   for the sale of one hundred toms of coconut oil.
(c)    A agrees to sell to B “one thousand mounds of rice at a price to be fixed by C.” As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
(d)    A agrees to sell to “his white house for rupees five hundred or rupees one thousand.” There is nothing to show which of the price was to be given. The agreement is void.

Further, an agreement “to enter into an agreement in future” is void for uncertainty unless all the terms of the proposed agreement are agreed expressly or implicitly. Thus, an agreement to engage a servant some time next year, at a salary to be mutually agreed upon is a void agreement.

(7) Wagering Agreement-
Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements. Thus where A and B mutually agree that if it rains today A will pay B Tk.100 and if it does not rain B will pay A Tk.100 or C and D entered into agreement that on tossing up a coin, if it fall head upwards C will pay D Tk.50 and if falls tail upwards D will pay C Tk.50, there is a wagering agreement.

In Tracker vs. Hardy Cotton, L.J., described a ‘wager’ ad follows: “The essence of gaming and wagering is that one party is to win and the other to lose upon a future event which at the time of the contract is of an uncertain nature- that is to say, if the event turns out the other way he will win.”


(8) Agreement Contingent on Impossible Events-
“Contingent agreements to do or not to do anything if an impossible event happens are void, whether the impossibility of the event is know on not to the parties to thr agreement at the time when it is made.” (Sec. 36)

Illustration
(a)    A agrees to pay B Rs.1000 (as a loan) if two straight line should enclosed a space. The agreement is void.
(b)    A agrees to pay B Rs.1000 (as a loan) if B will marry A’s daughter, C. C was dead at the time of the agreement, the agreement is void.

(9) Agreements to do Impossible Act-
“An agreement to do an act impossible in itself is void.” (Sec, 56 Part-1)

Illustration
(a)    A agrees with B to discover treasure by magic. The agreement is void. [Section 56].
(b)    A agrees with B to run with a speed of 100 Kilometer per hour. The agreement is void.

10. Agreement void where both parties are under a mistake as to matter of fact. 

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation.--- An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.

Illustrations

(a) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

11. Agreements void, if considerations and objects unlawful in part. If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

Illustration

A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A's promise and the consideration for B's promise being in part unlawful.

NEED ANDIMPORTANCE OF ACCOUNTING

Accounting - Need and Importance

What is Accounting? What is the Importance of Accounting? Why do we need accounting?

Accounting is very much connected with our personal lives in so far as it is in respect of every business. We all with intent or unknowingly generate accounting ideas in a way when we plan what we will do with money. We need to plan how much money will be spent whilst how much of it will be kept back. What is through this activity is a budget gets prepared. And we all are familiar with this concept - which is universally acceptable, that money must be spent cautiously. The same is true of a business. It is therefore imperative for a business to know about the inflow and out flow of economic resources and their results. Thus, accounting is the very need of a business to provide the information which is useful for sound economic decision making process and owing to the diversification between ownership and management.

Being known as "The Language of business", accounting is the basic need of a business organization to find out where it stands. It is of great essence to provide the basis for planning and budgeting while dealing with measurement of economic activities and communicating financial information to the users for decision making. Accounting is also meant for protecting the properties of business and communicating the results obtained from the financial statements to the intended parties like share holders, debtors, creditors, and investors while meeting the legal requirements. Accounting is included in those fields that are growing faster in this era. It is dynamic at the present time and meets the growing demands of trade, commerce and industry. It is appropriate to mention here that the advent of industrial revolution and technological advancements have given rise to widen more business prospects at the same time as bringing about change in the domain of accounting by which it has now begun to be known as a tool of management for planning and controlling process. Thus, it can be rightly said, in the present day and age, no economic activity can be carried out successfully with no thought of accounting.

According to American accounting association, accounting has been defined as, "The process of identifying, measuring, and communicating information to permit judgment and decision by the users." Yet another definition of American Institute of Certified Public Accountants (AICPA) is that "Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof."

Accounting entails recording, classifying and summarizing of business transactions. It is a process of identification, measurement and communication of economic information involving four interconnected phases. They are outlined herein: At the outset, the first phase is meant to record the economic events or transactions -depending upon their occurrences, chronologically in the books of accounts - called journals. This process is known as journalizing. Next comes the phase of ledger-posting: It is the process by which all the transactions are synthesized account-wise so that the accumulated balance of each of those accounts can be determined. The process of ledger posting is vitally important as it helps in ascertaining the net effect of various transactions during a given period. The subsequent stage is preparing the trial balance which involves the arrangement of all ledger accounts having been aggregated into debit and credit balances. This activity enables to check and confirm whether the total of debits is equal to that of credits. Finally, comes the phase of preparing financial statements. This phase is meant for finalization of accounts by measuring profit & loss account and preparing Balance Sheet- at the end of accounting period.

Every business needs to have two prime objectives, such as, to earn profit and to remain solvent and the information in relation to these objectives while ensuring whether they are being accomplished is provided by accounting. Accounting is important in the sense that it enables a business house to maintain complete and orderly prepared records of economic events by way of preparing books while facilitating the information for various purposes. Furthermore it helps to ascertain the net results in terms of profit or loss (Income Statement) and providing the information about financial position of the business (Balance Sheet) to the owners of a business relating to what the entity owns in the form of assets and what it owes in the form of liabilities at a particular point of time. Accounting information is valuable to the concerned managers too so as to ensure whether the business entity is being directed as it should be, and simultaneously it is a means to provide the information to the investors to find out the future prospects of business. It is also useful for the employees and customers in order to know the condition of the business entity.

Accounting is the basis and of a great assistance to management for planning, controlling and decision making process. It is with the help of accounting information that the performance of an entity can be appraised, at the same time as, its methodical records make possible to eliminate the frauds and the thefts. Furthermore, being concerned primarily with the creation of financial information for its users, accounting provides useful information for ascertaining the effectiveness and efficiency of a business. Hence, accounting is must for every business. Exclusive of accounting leads to create chaos and discrepancies in business transactions.

Accounting ought to be there for a business to run with accuracy, efficiency and effectiveness in terms of overall economic activities and their results. Accounting helps the management in planning and decision making process. There is no replacement of sincere and talented accountants, nor of their capabilities, nor of their diligence because their services offered in keeping track of every single one economic event while protecting entire business properties are so strong and efficient that the need of even highly paid bodyguards of businessmen is eclipsed. As it goes in the words of Elvis Presley, "I don't have any use for bodyguards, but I do have a specific use for two highly trained certified public accountants."