SALE OF GOODS ACT,1930

A PRESENTATION BY
ANAND PREM
 Essentials of contract of sale

 A contract (all essentials of valid contract

applicable)
 Between two parties.
 To transfer or agree to transfer the property
 In goods
 For a price, i.e. the consideration is money.
 Transfer of property
 Transfer of property means transfer of
ownership. Mere transfer of possession
can not be termed as a sale.
 Sec.2(11) ‘Property means general
property in goods and not merely a special
property.’
 General property means all ownership
rights and special property means limited
rights.
 Goods

 Sec.2(7). ‘Goods means every kind of

movable property other than actionable
claims and money, and includes stock and
shares, growing crops, grass, and things
attached to or forming part of the land
which are agreed to be severed before
sale or under contract of sale.’
 Kind of goods
 Existing goods- Sec.6(1) these are the goods which
are in existence and are physically present in the
sellers possession. They are further classified as
 Specific goods- 2(14) – these are the goods identified
and agreed upon at the time the contract is made.
 Ascertained goods- these are identified after the
formation of the contract.
 Unascertained goods- these are the goods which are
not specifically identified or agreed upon at the time of
the contract of sale.
 Future goods -sec.2(6) and Contingent goods 6(2)
 Price consideration
 The consideration for the contract of sale
must be money. If goods are exchanged
against goods the transaction is barter and
not covered by the act. However
consideration may be partly in money and
partly in goods.
NO SPECIAL FORMALITIES ARE REQUIRED
FOR CONTRACT OF SALE. IT MAY BE IN
WRITING OR ORAL OR IMPLIED.
 Sale and agreement to sale
 When property is transferred from seller
to buyer at the time of formation of
contract, an absolute sale occurs.
 When property in the goods is to be
transferred at some future date and not at
the time of contract, the contract of sale is
termed as an agreement to sell.
 Points of distinction- sale and
agreement to sell.
 Nature of contract-
executed / executory.
 Transfer of property-
immediate / future date.
 Nature of rights of buyer- jus
in rem / jus in personem
 Rights of buyer in case of
breach-recovery of goods,
specific performance /
Damages.
 Risk of loss- buyer’s / seller’s
 Rights of seller in case of
breach-suit for the price of
goods / Damages.
 Right to resell- not
available. / may resale but
liable for damages.
 Insolvency of seller- buyer
can recover goods / if price
already paid proportionate
amount can be recovered.
 Insolvency of buyer- if price
is not paid proportionate
amount can be recovered.
delivery of goods can be
demanded./ seller can
refuse delivery unless full
price is paid.
 Subject matter of contract of
sale-Goods.
 Goods may be classified as :-

1. Existing Goods- a) specific goods, b)

ascertained goods,
c) unascertained goods.
1. Future goods- which do not exist with the seller
at the time of sale. the contract thus is an
agreement to sell.
2. Contingent goods – a type of future goods, the
acquisition of which depends upon a contingency
which may or may not happen.
 Perishing of goods
 The possible causes of perishing of
goods:-
1. Physical destruction of goods.
2. Damage of goods in such a manner that
they loose their commercial value.
3. Loss of goods by theft.
4. Lawful acquisition of goods by
government.
 Effect of perishing of goods
 Goods perishing before formation of the
contract.- in case of specific goods such contract
is void ab initio as the performance of the
contract is impossible due to destruction of
subject matter.
 Goods perishing before the sale but after the
agreement to sell.:- in case of specific goods the
contract of sale becomes void and both parties
are excused from the performance. (Sec.8)
Effect of perishing of goods…
 Effect of perishing of future goods.:- Sec.8
applies in this case also which says ‘where
there is an agreement to sell specific
goods, and subsequently the goods
without any fault on the part of the seller
or buyer perish or become so damaged as
no longer to answer to their description in
the agreement before the risk passes to
the buyer, the agreement is thereby
avoided.’
 Price
 Sec.2(10) defines the price as ‘the money
consideration for the sale of goods.’
 Price has to be in terms of money.
 All monitory payments do not amount to
price.
 Fixing the price
 Price is mentioned in the contract.
 The manner of fixing the price is
mentioned in the contract.
 It is determined by the course of dealings
of the parties. when price is not fixed by
any of the above modes a ‘reasonable
price’ is considered as the price of the
contract.
 Time
 When time is stipulated regarding the payment of
price :- Time of payment is not considered the
essence of the contract unless a different intention
appears from the terms of the contract. Thus if
payment is not made in time the seller can not avoid
the contract but can claim damages.
 When time is stipulated regarding delivery of goods:-
time of delivery of goods is normally considered
essence of the contract. Thus non performance at
stipulated time will render the contract voidable at
the option of the buyer.
 Important points
 1) Not a complete code: The Sale of Goods Act
is not a complete code but rather it depends on
the general law of contract to supplement its
terms.
 2) Not a total conceptual redo: Often when law
is codified, it is rethought and logically put
together. The Sale of Goods Act is not a grand
and logical reformulation of the rules but rather
is merely a collection of the holdings of cases or
black letter law as it existed at the time.
 Important points

 3) Respects freedom of contract: The

Sale of Goods Act respects the general
conception of freedom of contract since it
generally only provides default rules.Thus,
business parties are free to make up
different rules if they wished.
 Classification of Terms
 In order to fully understand the Sale of Goods
Act, it is necessary to know one more important
aspect of the general law of contract. When a
contract is breached, i.e. whenever a party does
not perform precisely as promised, the innocent
party is always given the right to damages.
They may also be given another more extensive
right to discharge the contract. Whether or not
they have the ability to discharge the contract
depends on the type of term that was broken by
the breaching party.
 Types of Terms

 Traditional approach, the law distinguishes

between two types of contractual terms:
1) Condition
2) Warranty
 Conditions
 1) Condition: a term is a condition if
the innocent party would be substantially
deprived of the expected benefit of the
contract in the event of breach.
Ex: if a rental company delivers a minivan,
instead of a large moving truck as it
promised. Since the customer is deprived
of the essence of what it expected to
receive, it should not be required to
uphold its end of the bargain.
 In this example, the customer enjoys an option:
a) It can choose to discharge the contract and claim
damages for the losses that it suffered as a result of
the breach.
b) Or it can choose to continue on with the contract
and merely claim damages for the losses that it
suffered because it received a minivan instead of a
large moving truck. Breach of a condition does not
automatically discharge a contract.
 Important: if a contract is discharged this only
means that further performance of the contract is
suspended. It does not mean that the contract never
existed.
 Warranty
 2) Warranty: a term is a warranty if the
innocent party would not be substantially
deprived of the expected benefit of the contract
in the event of breach.
 Ex. The rental company properly delivers a
large moving truck but, contrary to its promise,
the radio receives AM signals, rather than FM
signals. The customer must carry on with the
contract. It is, after all, still receiving the
essence of what it expected to receive.
 A breach of warranty does notprovide the
innocent party with the option of discharging the
contract. Although that party can claim damages
for any losses that it suffered as a result of the
breach, it must continue on with the contract.
 Historically, it was thought that all terms could
be classified, as soon as a contract was formed,
as either (i) conditions, which support the right
of discharge if breached, or (ii) warranties,
which do not. But over time this was seen to be
unworkable.
 3) Innominate/ intermediate: A term
is said to be Innominate where the
consequences of a breach are not obvious
at the outset. In other words, where
depending upon the circumstances, the
innocent party may or may not be
substantially deprived of the expected
benefit of the contract in the event of
breach. As classic example, is the case
that follows.
 Defendant’s Argument
 The seaworthy term in the contract was a
condition, breach of which gave the
defendants a right to sue for damages and
a right to discharge the contract. They
could not be in breach since the contract
was discharged and all their obligations
were suspended.
 Scope of the Act
 2, defines a sale of goods as follows: Contract
whereby the seller transfers or agrees to
transfer the property in the goods to the buyer
for a money consideration, called the price ⒊. In
essence then, it defines it as title for price.
 From this definition some important limitations
become evident:
1) The act applies only to a sale
2) The act applies only to a sale of goods
3) The act applies only to a sale of goods for
money
 1. The act applies only to a sale.
That term covers two situations: sale and
agreement to sell.
A sale occurs if the buyer obtains ownership in
the goods as soon as the contract is created.
An agreement to sell occurs if the buyer does
not obtain ownership of the goods until
sometime after the contract is created. Ex: the
buyer may agree to purchase a car that has not
yet been manufactured or a bicycle that has not
yet been separated out from an inventory of
several dozen bikes.
 However, a sale of goods does not occur if the
buyer is not intended to eventually obtain
ownership. The Act does not apply:
1. if goods are leased (because ownership is not
transferred);
2. if they are given as a gift (because there is no
contract); or
3. if they are provided as security for a loan
(because ownership is not transferred for the
purpose of a sale.) Important point: The courts
are guided by the substance, rather than the
form, of a transaction. Consequently, the
parties cannot turn a lease into a sale simply by
calling it an agreement to sell.
 2. The Act applies only to a sale of Goods.
Goods include tangible things that can be moved
such as cars, books, pigs, and crops that will be
harvested from the land. Therefore, the act
does not apply to:
1. Sales of land or things that have already been
attached to land, such as houses and fences, as
those things are not moveable.
2. Sales of things that are not tangible. For that
reason, the Act does not apply to the sale of
trademarks, shares, or debts.
3. Sales of services. A difficult question
often arises, however, when goods are
sold together with services. In such
circumstances, a judge must determine
whether the essence of the contract was
the performance of a service on the one
hand or the transfer of property on the
other.
THANK YOU