IIPM CH.

4 SALE OF GOODS ACT

CHAPTER 4
SALE OF GOODS ACT 1930
Originally, the law relating to sale of goods was contained in Chapter VII of the Indian Contract Act, 1872. The
same was repealed and reenacted !y the "ale of #oods Act, III of 1$%&.
4.1 FORMATION OF THE CONTRACT OF SALE
Defnition
(Section 4)
A contract of sale of goods is a contract where!y the seller transfers or agrees to transfer the property in goods to
the !'yer for price(.
ESSENTIALS OF CONTRACT OF SALE
)rom the a!o*e definition, the following essentials of a contract of sale may !y noted+
1. There m'st !e at least two parties
2. Transfer or Agreement to transfer the ownership of goods.
%. The s'!,ect matter of the contract must necessarily be 'goods'.
-. The consideration is Price.
.. A Contract of sale may !e absolute or conditional
/. All other essentials of a valid contract m'st !e present.
`SALE` AND 'AGREEMENT TO SELL' DISTINGUISHED
Sale:
It is a contract where the ownership in the goods is transferred !y seller to the !'yer immediately at the
concl'sion contract. Th's, strictly spea0ing, sale ta0es place when there is a transfer of property in goods from
the seller to the !'yer. A sale is an e1ec'ted contract.
It m'st !e noted here that the payment of price is immaterial to the transfer of property in goods.
Ex -
A sells his 2amaha 3otor 4icycle to 4 for 5s. 1&,&&&. It is a sale since the ownership of the motorcycle has
!een transferred from A to 4.
Agreement to sell:
It is a contract of sale where the transfer of property in goods is to ta0e place at a f't're date or s'!,ect to some
condition thereafter to !e f'lfilled.
Ex
6i7 A agreed to !'y from 4 a certain 8'antity of nitrate of soda. The ship carrying the nitrate of soda
was yet to arri*e. This is 9an agreement to sale9. In this case, the ownership of nitrate of soda is to !e to
transferred to A on the arri*al of the ship containing the specified goods 6i.e. nitrate of soda7 : Johnson
!cdonald 618-27 $ 3 ; < /&&, /& 55 8%8=
6ii7 On 1
st
3arch 1$$8, A agreed to sell his car to 4 for 5s. 8&,&&&. It was agreed !etween themsel*es
that the ownership of the car will transfer to 4 on %1
st
3arch 1$$8 when the car is got registered in 49s
name. It is an agreement to sell and it will !ecome sale on %1
st
3arch when the car is registered in the
name of 4.
Other points of distinction !etween a sale and an agreement to sell are+
Sale Agreement to sell
1. A sale is an e1ec'ted contract.
2. In a sale, since the property has passed to the !'yer,
the seller can s'e the !'yer for the price of the
goods.
%. A sale creates a right in rem.
-. In case of loss of goods, the loss will fall on the !'yer,
e*en tho'gh the goods are in the possession of the
seller. It is !eca'se >5is0> is associated with
ownership.
-. In case !'yer pays the price and the seller thereafter
!ecomes an insol*ent, the !'yer can claim the goods
from the Official 5ecei*er or Assignee.
/. If the !'yer !ecomes an insol*ent witho't paying the
price, the ownership ha*ing passed to the !'yer, the
seller shall ha*e to deli*er the goods to the Official
1. An Agreement to sell is an e1ec'tory contract.
2. In an agreement to sell, in case of !reach, the
seller can only s'e for damages, 'nless the price
was paya!le at a stated date.
3. An agreement to sell creates a right in
personam.
4. The loss in this case shall !e !orne !y the
seller, e*en tho'gh the goods are in the possession
of the !'yer.
5. In these circ'mstances, the !'yer cannot claim
the goods !'t only a ratea!le di*idend for the money
paid.
6. In these circ'mstances, the seller can ref'se to
deli*er the goods to the Official Assignee or 5ecei*er.
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IIPM CH. 4 SALE OF GOODS ACT
Assignee or 5ecei*er e1cept where he has a lien o*er
the goods.
Sale and Hire Purchase Agreement
Hire Purchase Agreement
It is an agreement for hire, with an option to p'rchase.
The hirer, 'nder this agreement, is re8'ired to pay e*ery month a partic'lar s'm of money, and if he pays in
that way for a fi1ed n'm!er of months, the hirer will !ecome the owner of the goods on the payment of the
last instalment.
4't, if the hirer fails to pay any partic'lar instalment, the owner can terminate the contract and ta0e away
the goods, !eca'se the ownership contin'es to remain in the owner. A (?irep'rchase agreement( is
distinct from ("ale( in which price is paya!le !y instalments
A >?irep'rchase agreement,> does not res'lt in passing of the property 'nless the option to p'rchase is
e1ercised, 's'ally !y payment of all the instalments. Till s'ch time, it constit'tes !ailment.
Sale
ln case of sale, the property passes as soon as sale is made tho'gh price has not !een f'lly paid.
In determining as to whether a partic'lar contract !elongs to one type or the other, regard shall ha*e to !e paid
to the fact whether the hirer has merely an option to p'rchase, or whether he has !o'ght or agreed to !'y the
goods.
4.2 GOODS
Defnition of `GOODS` under the Act
>#oods> means e*ery 0ind of mo*ea!le property and incl'des stoc0 and shares, growing crops, grass, and
things attached to or forming part of the land, which are agreed to !e se*ered !efore sale or 'nder the contract
of sale.
Actiona!le claims and money are not incl'ded in the definition of goods.
Th's, goods include every kind of moveable property other than actiona!le claim or money. Example
goodwill, copyright, trademar0, patents, water, gas, and electricity are all goods and may !e the s'!,ect matter
of a contract of sale.
The test is if the property on shifting its sit'ation, does not lose its character, the said property shall !e mo*a!le
and fall within the definition of 9#oods9.
Which documents are considered as `DOCUMENTS OF TITLE TO GOODS`
A doc'ment of title to goods may !e descri!ed as any doc'ment 'sed as proof of the possession or control of
goods, a'thorising or p'rporting to a'thorise, either !y endorsement or !y deli*ery, the possessor of the
doc'ment to transfer or recei*e goods there!y represented.
The following are doc'ments of title to goods+
4ill of @adingA
Boc0 <arrantA
<areho'se0eeper>s CertificateA
<harfinger>s CertificateA
5ailway 5eceiptA
<arrant or order for the deli*ery of goodsA and
any other doc'ment 'sed in the ordinary co'rse of !'siness as a doc'ment of title .
CLASSIFICATION OF GOODS
#oods may !e classified into+
/. Existing -oods C1isting goods are those, which are owned or possessed !y the seller at the time of the
contract. Instances of sale of goods possessed !'t not owned !y the sellers fire sales !y agents and pledgees.
C1isting goods may !e either+
6a7 "pecific and Ascertained goods identified and agreed 'pon at the time a contract of sale is madeA or
6!7 #eneric and Dnascertained goods arc goods indicated !y description and not specifically identified.
0+ *uture -oods )'t're goods( means goods to !e man'fact'red or prod'ced or ac8'ired !y the seller after
ma0ing the contract of sale.
1+ #ontingent -oods - Contingent goods are the goods the ac8'isition of which !y the seller depends 'pon a
contingency which mayor may not happen. Contingent goods are a part of f't're goods.
4.3 PRICE
>Erice> means the money consideration for sale of the goods. >Erice> is an integral part of a contract of sale. If it
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IIPM CH. 4 SALE OF GOODS ACT
is not fi1ed or is not capa!le of !eing fi1ed, the whole contract is *oid ab-initio.
The Act pro*ides that the price may !e fi1ed
6I7 either !y the contract or
6II7 may !e agreed to !e fi1ed in a manner pro*ided !y the contract, e.g., !y a *al'er, or
6III7 it may !e determined !y the co'rse of dealings !etween the parties.
6IV7 in case, price is not capa!le of !eing fi1ed in any of the a!o*e ways, the !'yer is
!o'nd to pay reasona!le price. <hat is reasona!le price will *ary from case to case.
4.4 CONDITIONS AND WARRANTIES
[Sections 11-17]
In a contract of sale, parties ma0e certain stip'lations, i.e., agree to certain terms. "ome of them may !e
intended !y the parties to !e of a f'ndamental nat're, e.g., 8'ality of the goods to !e s'pplied. The stip'lation
essential to the main p'rpose of the contract, the !reach of which gi*es rise to a right to treat the contract as
rep'diated. "'ch stip'lations are 0nown as 9Conditions9.
In contrast, some may !e intended !y the parties to !e !inding, !'t of a s'!sidiary or inferior character, e.g.,
time of payment. Th's, stip'lation collateral to the main p'rpose of the contract, the !reach of which gi*es rise
to a claim for damages !'t not to a right to re,ect the goods. ?ere the stip'lations are 0nown as 9warranties>.
DISTINCTION BETWEEN 'CONDITION' AND 'WARRANTY'
Condition Warranty
1. A condition is a stip'lation 6in a contract7, which
is essential to the main p'rpose of the contract.
2. A !reach of condition gi*es the aggrie*ed party
a right to s'e for damages as well as the right to
rep'diate the contract.
%. A !reach of condition may !e treated as a
!reach of warranty in certain circ'mstances.
1. A warranty is a stip'lation, which is only
collateral or s'!sidiary to the main p'rpose of the
contract.
2. A !reach of warranty gi*es only the right to s'e
for damages. he contract cannot be repudiated.

%. A !reach of warranty cannot !e treated as a

!reach of condition.
Ex-
A man !'ys a partic'lar horse, which is warranted 8'iet to ride and dri*e. If the horse t'rns o't to !e *icio's, the
!'yer>s only remedy is to claim damages.
'ut if instead of !'ying a partic'lar horse, a man as0s a dealer to s'pply him with a 8'iet horse and the horse t'rns
o't to !e *icio's, the stip'lation is a condition and the !'yer can re,ect the horse, or 0eep the horse and claim
damages.
WHEN CONDITION TO BE TREATED AS WARRANTY
[SECTION 13]
Dnder the following circ'mstances a !reach of condition is to !e treated as a !reach of warranty, i.e., the right
to rep'diate the contract is deemed to ha*e !een lost+
1. !aiver of "ondition
2. "ompulsory treatment of breach of condition as breach of !arranty.
EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES
Conditions and <arranties may !e either e#press or implied.
They are said to !e (express( when the terms of the contract e1pressly pro*ide for them. They are said to !e
'implied' when the law deems their e1istence in the contract e*en witho't their act'ally ha*ing !een p't in the
contract.
6A7 I3E@ICB COFBITIOF"
The following are the implied conditions
617 Condition as to Title
627 "ale !y Bescription
6%7 Condition as to G'ality or )itness
6-7 3erchanta!le G'ality
Sale by sample - A contract of sale is a contract for sale !y sample where there is a term in the contract, e1press or
implied, to that effect.
In a sale !y sample, the following are the implied conditions+
1. The !'l0 shall correspond with the sample in 8'alityA
2. That the !'yer shall ha*e a reasona!le opport'nity of comparing the !'l0 with the sampleA and
%. That the goods shall !e free from any defects rendering them 'nmerchanta!le, which wo'ld not !e
apparent on reasona!le e1amination of the sample.
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IIPM CH. 4 SALE OF GOODS ACT
Ex
6i7 Certain shoes were sold !y sample for the )rench Army. The shoes were fo'nd to contain paper not
disco*era!le !y ordinary inspection. $eld% the !'yer was entitled to the ref'nd of price pl's damages.
6ii7 In a contract for the sale of !randy !y sample, the !randy that was s'pplied had !een colo'red with a dye.
?eld, the !'yer was not !o'nd !y the contract, tho'gh the !'l0 corresponded with sample, since the defect
co'ld not ha*e !een located on reasona!le e1amination of the sample 2!ody v+ -regson 618/87 @.5.-C1. -$.=.
647 I3E@ICB <A55AFTIC"
There are two implied warranties. These are+
1. <arranty of G'iet Eossession
2. <arranty of )reedom from Cnc'm!rances
Ex 3
A p'rchased a second hand typewriter from 4. A 'sed it for sometime and also spend some money on its
repairs. The typewriter t'rned o't to !e stolen one and as s'ch A had to ret'rn it to the tr'e owner. It was held
that A co'ld reco*er damages from 4 amo'nting to the price paid and the cost of repair 2!ason v+
'urmingham 61$-$7 2 H4 .-.=
4.5 DOCTRINE OF caveat emptor
Ca*eat Cmptor is a f'ndamental principle of the law of sale of goods. It means (Ca'tion 4'yer(, i.e. ("et the
buyer beware4+
In other words, it is not the d'ty of the seller>s d'ty to point o't defects of his own goods. The !'yer m'st
inspect the goods to find o't if they will s'it his p'rpose.
Ex-
Eigs were sold (s'!,ect to all fa'lts(, and these pigs, !eing infected, ca'sed typhoid to other healthy pigs of the
!'yer, it was held that the seller was not !o'nd to disclose that the pigs were 'nhealthy. The r'le of the law !eing
>Ca*eat Cmptor>. 2-oddard v+ .obbs /878, - App. Cas. 1%=.
Exceptions
1. <here the seller ma5es a false representation and buyer relies on that representation. The r'le of (Ca*eat
Cmptor( will not apply and the !'yer will !e entitled to the goods according to that representationA
2. <here the seller actively conceals a defect in the goods, so that on a reasona!le e1amination the same co'ld
not !e disco*eredA
%. <here the buyer ma5es 5nown to the seller the purpose for which he is buying the goods, and the seller
happens to !e a person whose !'siness is to sell goods of that description, then there is an implied condition
that the goods shall !e reasona!ly fit for s'ch p'rpose. The r'le of Ca*eat Cmptor will not applyA
-. In case of sale !y description, there is implied condition as to their !eing of merchantable 6uality. ?owe*er, if
the !'yer has e1amined the goods, this condition of (merchanta!ility( e1tends only to hidden or latent defects.
The defects, which s'ch e1amination o'ght to ha*e re*ealed, are not co*ered, i.e., the r'le of Ca*eat Cmptor
will !e applica!le.
Ex -
In 7onoghue v+ Stevenson 6the 9snail in the ginger-beer 9case7 it was held that man'fact'rers owed a d'ty to
the 'ltimate cons'mer to ta0e care in ma0ing their goods where there is no li0elihood of their !eing e1amined
!efore they reach the 'ltimate cons'mer.
When does property pass from the seller to the buyer
6a7 Specific or Ascertained goods the property in the good is transferred to the !'yer at s'ch times the parties
to the contract intend to !e transferred or when something has to !e done !y the seller to p't them in a
deli*era!le state, property passes only when s'ch thing is done, and the !'yer has notice thereof.
Ex-
The whole of the contents of a cistern of oil were sold, and the seller had to p't the oil in cas0s to !e then
deli*ered to the !'yer. $eld% the property did not pass 'ntil the oil was act'ally p't into cas0s ready for deli*ery
and the !'yer was notified accordingly. 2&ugg v+ !inett% 18&$,11 Cast 2.1&1=.
8b9 %nascertained or *uture -oods property in the goods is not transferred to the !'yer 'nless and 'ntil the
goods are ascertained.
Ex-
I agrees to sell 2 2&& 8'intals of wheat o't or a larger 8'antity lying in I>s store. The agreed price is to !e paid
on the day appointed 'nder the contract. Dnless and 'ntil the re8'ired 8'antity of 2&& 8'intals is separated
from the larger 8'antity and the goods ha*e th's !een ascertained, property cannot pass from the seller to the
!'yer.
4.6 TRANSFER OF TITLE BY NON-OWNERS
[Sections 27-30]
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IIPM CH. 4 SALE OF GOODS ACT
The general r'le is that only the owner of goods can transfer a good title. Fo one can gi*e a !etter title than he
himself has. This r'le is e1pressed !y the ma1im &'emo dat (uod non habet& which means (that no one can
gi*e what he himself has not(
If the seller, therefore, has no title, or a defecti*e title, the !'yer>s title will !e e8'ally wanting or defecti*e as the
case may !e, tho'gh he may !e a p'rchaser !onafide and for *al'e.
Ex
A finds a ring of 4 and sells it to a third person who p'rchases it for *al'e and in good faith. The tr'e owner, i.e.,
4 can reco*er from that person, for A ha*ing no title co'ld pass none the !etter. 2*aru6uaharson v+ :ing
61$&27 A.C. %2-.7.
Exceptions to the Rule
1. Sale by Mercantile Agent
2. Sale by a Joint-owner
3. Sale by a Person in Possession under a Voidable Contract
. Sale by the Seller in Possession o! "oods a!ter Sale - <here a seller ha*ing sold goods, contin'es in possession
thereof or of doc'ments or title to the goods, s'ch seller will pass a good title to the 6second7 !'yer, if that !'yer
has acted in good faith and witho't notice of the pre*io's sale.
#. Sale by an un$aid seller - a seller who has e1ercised his right of lien or stoppage in transit can, resell the goods
and con*ey a *alid title to another !'yer, tho'gh no notice of resale has !een gi*en to the original !'yer.
DUTIES OF THE SELLER AND BUYER
Duty of the seller
a) To deli*er the goods, in accordance with the terms of the contract of sale.
b) Beli*ery and payment of price are conc'rrent conditions.
c) The seller of goods has the d'ty of gi*ing deli*ery according to the terms of the contract.
Duty of the buyer
a7 Eay for the goodsA
!7 Accept deli*eryA and
c7 Eay compensation to the seller in case he wrongf'lly ref'ses to accept deli*ery.
DELIVERY
It has !een defined as a *ol'ntary transfer of possession from one person to another..
Beli*ery of the goods may, !e+
I. *hysical or +ctual ,elivery
2. -ymbolic ,elivery e+g+, deli*ery of a railway receipt properly endorsed, or deli*ery of the 0ey of a wareho'seA
%. "onstructive ,elivery or +ttornment only an ac0nowledgement !y the person in possession that he holds
them on !ehalf of another.
Rules regarding delivery
1. The seller is not bound to deli%er goods till the buyer a$$lies for deli*ery in terms of the contract.
2. Place o! &eli%ery goods sold are to !e deli*ered at the place agreed for deli*ery in the contract.
%. 'ime o! &eli%ery J as per contract otherwise within reasona!le time.
-. The e($enses of and incidental to p'tting the goods into a deli*era!le state shall !e !orne !y the seller, as per
the terms of the contact.
.. &emand and tender must be at a reasonable hour <hat is a reasona!le ho'r is a 8'estion of fact.
/. &eli%ery o! )rong *uantity <here the seller deli*ers to the !'yer a 8'antity of goods less than he contracted
to sell, the !'yer may re,ect them. 4't, if the !'yer accepts the goods so deli*ered he shall !e re8'ired to pay
for them at the contracted rate.
7. +nstalment &eli%eries The !'yer is not !o'nd to accept deli*ery !y instalment, 'nless otherwise agreed.
8. &eli%ery to the Carrier or )har!inger Beli*ery of goods !y the seller to a carrier for transmission to !'yer or
to wharfinger for safe c'stody is prima facie deemed to !e a deli*ery of the goods to the !'yer.
As regards ins'rance, the sellerKs d'ty is only to gi*e s'fficient notice to the !'yer to ena!le him to ins're the
goods. Alternati*ely it may !e agreed to send the goods c.i.f. or e1ship.
$. ,uyer not bound to return re-ected goods when the goods are deli*ered to a !'yer on sale or ret'rn !asis and
the !'yer ref'ses to accept them, he is not !o'nd to ret'rn them to the seller, !'t it is his d'ty to inform the
seller that he has ref'sed themA otherwise after lapse of a reasona!le time, he will !e deemed to ha*e accepted
them.
1&. .iability o! the ,uyer <hen the seller is ready and willing to deli*er the goods and re8'ests the !'yer to ta0e
deli*ery and the !'yer does not within a reasona!le time ta0es deli*ery of the goods, he is lia!le to the seller for
any loss occasioned !y his neglect or ref'sal to ta0e deli*ery, and also for a reasona!le charge for the care and
c'stody of the goods.
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IIPM CH. 4 SALE OF GOODS ACT
4.7 UNPAID SELLER AND HIS RIGHTS
A contract is comprised of reciprocal promises, in a contract of sale, if seller is 'nder an o!ligation to deli*er
goodsA !'yer has to pay for it. In case !'yer fails or ref'ses to pay, the seller, as an 'npaid seller, shall ha*e
certain rights.
Who is an unpaid seller
An 'npaid seller of goods is a person who has not !een paid the whole of the price or to whom the whole of the
price has not !een tendered. The term (seller( incl'des an agent of the seller.
The seller of goods is deemed to !e an ('npaid seller( if+
6a7 the whole of the price, has not !een paid or tenderedA
6!7 when a !ill of e1change or other negotia!le instr'ment has !een recei*ed as conditional payment, and the
condition on which it was recei*ed has not !een f'lfilled !y reason of the dishono'r of the instr'ment or
otherwise. .
Rights of an unpaid seller
5ights of an 'npaid seller may !roadly !e classified 'nder two heads namely+
1. .ights against goods
An 'npaid seller has the following rights against the goods+
/a0 .ien on the goods
/b0 A right o! sto$$age in transit
/c0 A right o! re-sale
2. .ights +gainst the /uyer *ersonally
An 'npaid seller, !esides his rights against goods, has the following rights against the !'yer personally+
6i7 5ight to s'e for the priceA and
6ii7 the right to s'e the !'yer for damages for nonacceptance.
4.8 SALE BY AUCTION
(Section 64)
In the case of sale !y a'ction the following r'les apply+
1. <hen the goods are p't 'p for sale in lots, each lot is deemed, prima facie% to !e the s'!,ect matter of a
separate contract of saleA
2. At an a'ction, the sale is complete when the a'ctioneer anno'nces its completion !y the fall of the hammer or
in other c'stomary mannerA 'ntil s'ch completion any !idder may withdraw his !id.
%. A right to !id may !e reser*ed e1pressly !y or on !ehalf of the seller and where s'ch right is e1pressly so
reser*ed, !'t not otherwise, the seller or any person on his !ehalf may !id at the a'ctionA
-. <here the sale is not notified to !e s'!,ect to a right to !id on !ehalf of the seller, it shall not !e lawf'l for the
seller to !id for himself or to employ any person to !id at s'ch sale, or for the a'ctioneer 0nowingly to ta0e any
!id from the seller or any s'ch person, Any sale contra*ening this r'le shall !e treated as fra'd'lentA
.. The sale may !e notified to !e s'!,ect to a reser*ed or 'pset priceA
/. If the seller ma0es 'se of pretended !idding to raise the price, sale is *oida!le at the option of the !'yer.
2$hornett v+ .aines. 18-/, 1. 3. ; <. %/7=.
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