TYPES OF GOODS

According to Section 2 (7) the term goods means “every kind of movable property other than
actionable claims and money and includes stock and shares, growing crops and other attached to
or forming part of the land which are agreed to be severed before sale or under the contract of
sale.”
Thus every type of movable property comes within the definition of the term „goods‟. Goodwill,
patents, trademarks, water, gas, electricity etc are also considered movable properties and are
therefore, treated as goods. Actionable claims and money have been excluded from the definition
of the term goods. This is means a claim which can be recovered only by means of a suit or an
action in the court of law. Money in circulation is not included in the definition of goods but old
and rare coins easily be treated as goods and can be the subject matter of a contract of sale.

Types of Goods Existing

Goods Future

Contingent

1. Existing Goods: goods owned or possessed by the seller at the time of making the
contract of sale is called existing goods. In case of sale by an agent or pawnee, the goods
are possessed but not owned by the seller. These goods are classified as-
a) Specific goods – goods identified and agreed upon at the time of making of the
contract of sale of goods.
b) Ascertained goods – goods identified subsequent to the formation of the contract of
sale. The terms, ascertained and specific are commonly used for the same kind of
goods.
c) Unascertained goods or generic goods – goods not identified or agreed upon at the
time of making of the contract of sale. They are goods defined by description only.

Latika Malhotra Business laws Unit-1

 Example: X has 10 cows. He promises to sell 1 to y, pointing it out to y at the time of
sale. Goods have been identified at the time of sale and therefore it is a contract of sale of
specific goods.
2. Future goods: goods to be manufactured, produced or acquired after the making of the
contract are called future goods. Such a contract is always an agreement to sell. It is
never actual sale because a man cannot assign what is not in existence.
Example: A contact, on 1st January to sell B 50 shares of xyz ltd., to be delivered and
paid for on the 1st march of the same year. At the time of making the contract, A is not in
any possession of the shares. The contract is a contract for the sale of future goods.
3. Contingent goods: goods the acquisition of which the seller depends upon an uncertain
contingency are called contingent goods. They are also a type of future goods.
Example: A agrees to sell 100 units of an article provided the ship which is bringing
them, reaches the port safely. This is an agreement for sale of contingent goods.
SALE & AGREEMENT TO SELL

Basis Sale Agreement to Sell

Nature of Sale is an executed contract Agreement to sell is an executory

contract contract
Transfer of Property in the goods passes to the Property in the goods is agreed to be
ownership buyer immediately. passed at some future time or on the
fulfillment of some condition.
Type of Goods Sale can only be in case of existing Agreement to sell is mostly in case
and specific goods. of future and contingent goods.
Seller’s right of The seller has no right to resell or The goods can be disposed off by
resale deal in those goods even though the seller as the property in the
the goods may be in his possession goods has not yet been transferred.
Consequences of If the buyer fails to pay, the seller If there is a breach of contract by
breach can sue for price. the buyer, the seller can sue only up
to the damages and not for the price.
Incidence of risk The buyer is to bear any kind of The seller bears the risk
of loss loss that may arise.

Latika Malhotra Business laws Unit-1

 Insolvency of The official assignee of the The seller can refuse the delivery of
buyer receiver can claim delivery of goods unless he is paid in full
goods from the seller, who will be
entitled to only a ratable amount.
Insolvency of The buyer can compel the Receiver The buyer can only claim a ratable
seller to sell and deliver goods to him amount.

CONDITIONS & WARRANTIES

Basis Conditions Warranties

Nature Condition is stipulation which is It is a stipulation which is

essential to the main purpose of the collateral to the main purpose of
contract. the contract.
Breach If there is a breach of contract the If there is a breach of contract the
aggrieved party can repudiate the aggrieved party cam claim only
contract of sale and a right to sue damages.
for damages
Treatment of A breach of condition may be A breach of warranty can never
breach treated as a breach of warranty. be treated as a breach of
condition.

DOCTRINE OF CAVEAT EMPTOR

The maxim of caveat emptor means “let the buyer be aware”. According to the doctrine of caveat
emptor it is the duty to be careful while purchasing goods of his requirement and, in the absence
of any enquiry from the buyer, the seller is not bound to disclose every defect in goods of which
he may be cognizant. The buyer must examine the goods thoroughly and must see that the goods
he buys are suitable for the purpose for which he wants them. If the goods turn out to be
defective or do not suit his purpose the buyer cannot hold the seller liable for the same, as there
is no implied undertaking by the seller that he shall supply such goods as suit the buyer‟s

Latika Malhotra Business laws Unit-1

purpose. If, therefore, while making purchases of goods the buyer depends upon his own skill
and makes a bad choice, he must curse himself for his own folly, in the absence of any
misrepresentation or fraud or guarantee by the seller.
Example: A purchases a horse from B. A needed the horse for riding but he did not mention this
fact to B. the horse is not suitable for riding but is suitable only for being driven in the carriage.
Caveat
Emptor being the rule, A can neither reject the horse nor can he claim any compensation from B.

Exceptions – The doctrine of caveat emptor has the following exceptions –

a) Implied condition as to quality or fitness: where the buyer has made known to the
seller the purpose for which he requires the goods and depends on the skill and judgment
of the seller, there is an implied condition that the goods will be fit for the purpose for
which the buyer requires them. This condition is not applicable in those cases where the
goods have been sold under a patent mark or trade mark.
b) Sale of goods by description: where the goods are purchased by description from a
seller who deals in such class of goods, there will be an implied condition that the goods
shall be of a merchantable quality.
c) Usage of trade: proof of reasonable usage or custom of trade may also establish an
implied condition as to quality or fitness of goods for a particular purpose.
d) Consent by fraud: the doctrine of caveat emptor shall not apply to all those purchases
which have been made by a buyer under a contract where his consent was obtained by the
seller by fraud, i.e., where the buyer relies on false representation of the seller and suffers
damage. A seller, who is guilty of fraud, shall have no protection of the doctrine of caveat
emptor.

PASSING OF PROPERTY FROM THE SELLER TO THE BUYER IN A CONTRACT

FOR THE SALE OF GOODS

The primary rules for ascertaining when the property in goods passes to the buyer are:

Latika Malhotra Business laws Unit-1

 1. Goods must be ascertained: where there is a contract for the sale of unascertained
goods, no property in the goods is transferred to the buyer unless and until the goods are
ascertained.
Example: Under a contract of sale, B was entitled to cut teak trees of more than 12 crore
girth. The stumps of trees after cutting had to be 3 inches high. Held, in these
circumstances property in the timber that was cut could pass to B when the trees were
felled. Till the trees were felled, they were not ascertained.
2. Intention of the parties: where there is a contract for the sale of specific or ascertained
goods, the property in them passes to the buyer at the time when the parties intend it to
pass. For the purpose of ascertaining the intention of the parties, regard shall be had to the
terms of the contract, the conduct of the parties and the circumstances of the case.
3. When the intention of the parties cannot be ascertained: Where the intention of the
parties as to the time when the property in the goods is to pass to the buyer cannot be
ascertained from the contract, the rules contained in section 20 to 24 apply i.e., specific
goods, unascertained goods & goods send on approval or „on sale or return‟.

“A SELLER CANNOT CONVEY A BETTER TITLE THAN HE HIMSELF HAS”

The general rule relating to the transfer of title on sale is that “the seller cannot transfer to the
buyer of goods a better title than he himself has.” If the title of the seller is defective the buyer‟s
title will also be subject to the same defect. Nemo dat quod non habet – no one can give that
which he has not. In other words a buyer cannot acquire a better title that the seller possesses.
Therefore a buyer cannot get good title to the goods unless he has purchased the goods from a
person who was the owner of the goods or a person who is properly authorized by the seller to
sell the goods. The title of the buyer will remain defective if the title of the seller was defective
in spite of the fact that the buyer may have purchased the goods bona fide and for value.
Following are the exceptions to the above rule. It is in these cases that the non owner can convey
a better title to the bona fide purchaser of goods for value.
1) Title by estoppel: where the true owner by his words or conduct causes the buyer to
believe that the seller was the owner of the goods or has the owner‟s authority to sell

Latika Malhotra Business laws Unit-1

 them and induced him to by goods in that belief, he will be stopped afterwards from
setting up seller‟s want of title or authority to sell.
Example: A says to B in the presence of C, the real owner of the goods that the A is the
owner of goods. C remains mum. Subsequently A sells the same goods to B. C cannot
recover the goods from B since by his conduct he has accepted that A is the owner of the
goods.
2) Sale by a mercantile agent: where goods are sold by a mercantile agent, who is in the
possession of the goods or any document of title to the goods, with the consent of the real
owner, in the ordinary course of the business, the buyer will get good title if he acts in
good faith.
Example: A entrusts his car to his agent B for sale. He instructs B not to sell the car
below a sum of Rs10000. A sells it to C for Rs8000 and absconds with the money. A
cannot recover the car from C since the sale was made by a mercantile agent who
transferred valid title to C.
3) Sale by a co-owner: a buyer who purchases goods from a co-owner will get valid title.
Example: A and B are co owners of a lantern projector with several slides. They use the
projector by turns. While the projector is with A, with the consent of B, he wrongfully
sells it away to C, a bona fide purchaser for value. C gets a good title.
4) Sale by a person in possession of goods under voidable contract: where a person who
is in the possession of the goods under a contract voidable sells such goods to another
before the contract is avoidable by the party having the option to do so and the buyer
purchases them for value, in good faith and without notice of the seller‟s defect of title,
he will under such conditions acquire a good title.
Example: A obtains goods from B by falsely representing that he is X‟s agent. He
subsequently sells them to C, a bona fide purchaser for value. C does not get any title to
the goods since the person who self the goods to him, himself did not have any title.
5) Sale by seller in possession after sale: where a person having sold goods is in
possession of the goods or documents of title to the goods, resells the goods, the new
buyer will get a good title over the goods provided he acts in good faith, does not have
notice of the prior sale and obtains possession of goods or documents of title to the
goods.

Latika Malhotra Business laws Unit-1

 Example: A bought motor lorry from B, a dealer in motor lorries and took its delivery.
Subsequently A let out the vehicle to B on a hire purchase agreement. B then sold it away
to C who bought it in good faith. It was held that sale to C was not valid because he took
it not from a seller in possession but a bailee of goods.
6) Sale by a buyer in possession of goods: where a person having bought or agreed to buy
goods, obtains, with consent of the seller, possession of goods or of the documents of title
of the goods, the delivery or transfer by such person or by a mercantile agent acting for
such person of the goods or documents, by way of sale, pledge or other disposition
thereof will be valid and effective if the person receiving the same acted bona fide and
without notice of the seller‟s lien.
7) Unpaid seller’s right of re sale: A purchaser of goods of value from an unpaid seller,
who has the goods in his possession in the exercise of his right of lien or stoppage in
transit, shall get an absolute title to the goods even though re sale may not be justified
under the circumstances.
8) Sale under the provisions of other acts: other acts also contain some provisions under
which a non-owner may pass to the buyer a better title than he himself has. For example,
a) Sale by finder of lost goods under circumstances
b) Sale by pawnee or pledge under certain circumstances
c) Sale of official receiver in case of insolvency of an individual

DELIVERY OF GOODS

The rules regarding delivery of goods are as follow:-

1. Delivery may be either actual or symbolic or constructive: delivery of goods sold may
be made by doing anything which the parties agree shall be treated as delivery or which
has the effect of putting the goods in the possession of the buyer or of any person
authorized to hold them on his behalf. Thus, the delivery of the goods may be either
actual or symbolic or constructive.
2. Delivery and payment are concurrent conditions: unless otherwise agreed, delivery of
the goods and payment of the price are concurrent conditions, that is, the seller should be
ready and willing to deliver the goods to the buyer in exchange for the price and the

Latika Malhotra Business laws Unit-1

 buyer should be ready and willing to pay the price in exchange for possession of the
goods simultaneously, just like in a cash sale over a shop counter.
3. Effect of part delivery, when property in goods is to pass on delivery: a delivery of
part of the goods, in progress of the delivery of the whole, has the same effect, for the
purpose of passing the property in such goods, as a delivery of the whole. In other words,
when a delivery of part of the goods has been made with the intention of delivering the
rest also, the property in the whole of the goods is deemed to pass to the buyer as soon as
some portion is delivered.
4. Buyer to apply for delivery: although it is the duty of the seller to deliver the goods
according to the contract, yet he is not bound to deliver them until the buyer applies for
delivery. It is the duty of the buyer to demand delivery and if he fails to do so the buyer
cannot blame the seller for the non delivery. The parties may however agent otherwise.
5. Time of delivery: Where under the contract of sale the seller is bound to send the goods
to the buyer, but no time for sending them is fixed, the seller is bound to send them
within a reasonable time. Further, demand of delivery by the buyer or the tender of
delivery by the seller should be made at a reasonable hour.
6. Place of delivery: The place of delivery may be stated in the contract of sale, and where
it is so stated, the goods must be delivered at the named place during business hours on a
working day.
7. Delivery of goods where they are in possession of a third party : where the goods at
the time of sale are in possession of third person, there is no delivery by the seller to the
buyer unless and until such third person acknowledges to the buyer that he holds the
goods on his behalf. Such a delivery is known as “constructive delivery” and requires the
consent of all the three parties, the seller, the buyer and the person having the possession
of the goods. Where the seller hands over the “delivery order” to the buyer, there is no
delivery unless the seller‟s agent holding the goods ahs assented thereto.
8. Expenses of delivery: unless otherwise agreed, the expenses of incidental to putting the
goods into a deliverable state must be borne by the seller.
9. Delivery of wrong quantity or different quality: As already observed, a seller is duty
bound to deliver the goods to the buyer strictly in accordance with the terms of the

Latika Malhotra Business laws Unit-1

 contract. A defective delivery entitles the buyer to – reject the whole, accept the whole to
accept the quantity and quality he ordered and reject the rest of the goods so delivered.
10. Installment deliveries: unless otherwise agreed, the buyer of goods is not bound to
accept delivery thereof by installments. If the parties so agree then only the delivery of
the goods may be made by installments.
11. Delivery to carrier or wharfinger: where the seller is authorized or required to send the
goods to the buyer, delivery of the goods to a carrier, whether names by the buyer or not,
for the purpose of transmission to the buyer or not, for the purpose of transmission to the
buyer, or delivery of the goods to a wharfinger for safe custody is prima facie deemed to
be a delivery of the goods to the buyer.
12. Liability of buyer for neglecting or refusing to take delivery of goods: when the seller
is ready and willing to deliver the goods and requests the buyer to take delivery, and the
buyer does not within a reasonable time after such request take delivery of the goods, he
becomes liable to the seller for any loss occasioned by his neglect or refusal to take
delivery, and also for a reasonable charge for the care and custody of the goods.

RIGHTS OF AN UNPAID SELLER

The seller of goods is deemed to be an unpaid seller a) when the whole of the price has not been
paid or tendered b) where a bill of exchange or other negotiable instrument has been received as
a conditional payment i.e., subject to the realization thereof, and the same has been dishonored.

Rights of an unpaid seller

An unpaid seller has two fold rights –
i) Rights of an unpaid seller against the goods
ii) Rights of unpaid seller against the buyer personally
1) Rights of unpaid seller against the goods.
An unpaid seller has the following rights against the goods notwithstanding the fact that
the property in the goods has passed to the buyer.
a) Right of lien

Latika Malhotra Business laws Unit-1

 „Lien‟ is the right to retain possession of goods and refuse to deliver them to the
buyer until the price due in respect of them is paid or tendered. An unpaid seller in
possession of goods sold is entitled to exercise his lien on the goods. Example: bill of
lading provided the goods remain in the actual possession of the seller.
b) Right of stoppage of goods in transit
The right of stoppage in transit means the right of stoppage further transit of the
goods while they are while they are with a carrier for the purpose of transmission to
the buyer, remaining possession of them and retaining possession until payment or
tender of the price. Thus, in a sense this right is an extension of the right of lien
because it entitles the seller to regain possession even when the seller has parted with
the possession of the goods.
Unpaid seller may resume possession of the goods so long as they are in the course of
transit and may retain those goods under his possession until he is paid or tendered
the price thereof.
c) Right of resale
The right of resale is a very valuable right given to an unpaid seller. In the absence of
this right, the unpaid seller‟s other rights against the goods, namely, „lien‟ and
stoppage in transit‟ would not have been of much use because these rights only entitle
the unpaid seller to retain the goods until paid by the buyer. Where the seller
expressly reserves right of resale in case the buyer makes default, the seller may resell
the goods in the event of such default. No notice to the buyer will be necessary in
such a case. The original contract of sale shall thereby be rescinded, but the seller will
be entitled to get damages from the buyer for the loss suffered by him.

2) Rights of unpaid seller against the buyer personally

The unpaid seller, in addition to his rights against the goods has the following 3 rights of
action against the buyer personally:
a) Suit for price: Where property in goods has passed to the buyer, or where the sale
price is payable on a day certain, although the property in goods has not passed, and
the buyer wrongfully neglects or refuses to pay the price according to the terms of the
contract, the seller is entitled to sue the buyer for price, irrespective of the delivery of

Latika Malhotra Business laws Unit-1

 goods. Where the goods have not been delivered, the seller would file a suit for price
normally when the goods have been manufactured to some special order and thus are
unsalable otherwise.
b) Suit for damages for non acceptance: Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may sue him for damages for non
acceptance. The seller‟s remedy in this case is a suit for damages rather than an action
for the full price of the goods.
c) Suit for special damages and interest: The seller can sue the buyer for „special
damages‟ also for such loss which the parties knew when they made the contract to be
likely to result from the breach of it.

Latika Malhotra Business laws Unit-1