SALE OF GOODS ACT, 1930

‘SALE’ AND ‘AGREEMENT TO SELL’

According to Sec.4 of the Act, a contract of sale of goods is a contract, where by the seller transfers or
agrees to transfer the property in goods to the buyer for a price.
A contract of sale may be by absolute sale or conditional sale.
The contract of sale comprises of two things namely, (1) Sale and (2) Agreement to sell.
SALE Seller transfers the property in the goods immediately to the buyer
AGREEMENT TO SELL The transfer of the property in the goods is to take place at a future date
subject to some conditions thereafter to be fulfilled

ESSENTIALS OF A CONTRACT OF SALE

1 A valid contract 2 Two parties 3 The subject matter of the contract is sale of goods
4 Transfer of property 5 Monetary consideration

‘SALE’ AND ‘AGREEMENT TO SELL’- Differentiating Features

No FEATURES SALE AGREEMENT TO SELL
01 Nature of contract Executed Executory
02 Subject matter Existing Goods Future / Contingent Goods
03 Transfer of property, At the time of Contract When the conditions to the contract
takes place………. are fulfilled.
04 Nature of Right RIGHT IN REM RIGHT IN PERSONAM
The owner gets an absolute right The contracting parties are alone
over the property ,which is concerned about the agreement to
recognized by the whole world sell. The world at large is not at all
concerned with it.
05 In case of, Breach of (1) Buyer. (1) Buyer
contract, remedy is (2) The Goods ( for claiming the damages)
available against… (If the goods are in the
possession of the seller)
06 Who should bear the loss on lost goods, IF the goods are held by …………..
(a) Seller BUYER SELLER
(b) Buyer BUYER NA
07 Right of Re-Sale of goods, When the goods are held by……………
(a) Seller Available to Unpaid Seller Available to seller
(b) Buyer Available Not applicable
08 Insolvency of Seller The Buyer being the owner of the If the buyer, already paid amount,
goods, can recover the goods from buyer can get a ratable dividend .
the official receiver of the seller. No recourse against the goods.
09 Insolvency of Buyer The seller shall deliver the goods to The seller is not bound to part with
the official receiver of the buyer. the goods.

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CONDITIONS AND WARRANTIES: Definitions:
REPRESENTATIONS When forming a contract, a party may make a statement with a view to
induce the other party to enter in to a contract. Such statements when made
before entering in to a contract are called as representations
PUFF A representation by way of mere expression of an opinion or commendation
by the seller is known as Puff.
STIPULATION A representation which is an integral part of a contract is called stipulation.
CONDITION A stipulation which is essential to main purpose of the contract is called
condition
WARRANTY A stipulation , which is collateral to the main contract is called Warranty

DIFFERENCES BETWEEN THE CONDITIONS AND WARRANTIES

Differentiating Feature CONDITIONS WARRANTIES
1 Nature of the stipulation, to the main purpose of the contract Essential Collateral
2 The Breach entitles the injured party to…
Repudiation of the Contract Yes No
Reuse the goods Yes No
Recover the price ( If already paid Yes No
Recovery of Damages NA YES

TYPES OF CONDITIONS AND WARRANTIES

EXPRESS These are mentioned in the contract in clear terms
CONDITIONS &
These are deemed to have been included in a contract by the
WARRANTIES IMPLIED
presumption of law, unless the parties agreed to the contrary

IMPLIED CONDITIONS
Sl.No IMPLIED EXPLANATION
CONDITIONS
(With respect to)
Normally, it is presumed that, the seller has a right to sell the goods,
01 TITLE
unless otherwise expressed in the contract.
When a buyer informs the seller, the purpose for which he intends to
purchase the goods, the seller should sell such goods, which would
02 QULITY or FITNESS
reasonably serve the purpose of the purchaser. This condition does
not apply in case of patented goods.
Merchantability denotes the standard quality, condition, salability of
a specific commodity.
03 The seller shall ensure that the goods are free from latent defects. The
MERCHANTABILITY
state of goods sold should be in such a position that, they are fit for
resale under the description by which they are known.
The seller must provide the goods ordered with a specific description
Sale of goods by
04 by the buyer. He should not supply some other goods, even though
DESCRIPTION
they are superior to those ordered by the buyer.
When a contract of sale is made by showing a sample, the following
conditions are implied.
Sale of goods by 1. The supply made shall correspond to the sample, in quality.
05
SAMPLE 2. The buyer shall have a reasonable opportunity for a
comparing the bulk supplied with the sample.
3. The goods are merchantable.
Sale of goods by In a sale by description and sample, the goods supplied to the buyer,
06 DESCRIPTION & shall correspond with the sample and as well as description.
SAMPLE
IMPLIED WARRANTIES
Sl.No IMPLIED EXPLANATION
WARRNTIES
01 QUIET POSSESSION The buyer shall have the possession and enjoyment of the goods sold
to him, without any disturbance by the seller or any other person
02 FREEDOM FROM The goods sold are free from any encumbrances other than those , if
ENCUMBRANCES any , mentioned in the sale agreement.
03 DISCLOSURE OF The seller would warn the buyer, about the latent qualities of the
CONDITIONS & hazardous goods sole by him, when he is aware that the buyer is
WARRANTIES ignorant of such fact.
04 CUSTOM AND As per the custom and usage of trade, the seller shall to annex the
USAGE OF TRADE contract of sale , a warranty as to the fitness of an item for a
particular purpose.

CAVEAT EMPTOR: (LET BUYER BE WARE)

The maxim “Caveat Emptor”, means that “let Buyer beware.”. As per the Roman law, it is not the duty of the
seller to sell goods to the buyer for a specific purpose, unless such purpose is made known to the seller. It is
there fore the duty of the buyer to satisfy himself about the quality of the goods and their fitness for a particular
purpose.
Sec.16 of Sale of Goods Act, 1930, states that, “Subject to the provisions of the Act or any other law for
the time being in force, there is no implied warranty or condition, as to the quality or fitness for any particular
purpose of goods supplied under a contract of sale.”

EXCEPTIONS TO THE RULE: “Caveat Emptor”, does not apply in the following cases.
1) Conditions as to the quality or fitness of goods.
2) Conditions as to the merchantability of goods.
3) Implied warranties by customs, usage of trade.
4) Fraudulent Sale.

RIGHTS OF AN UNPAID SELLER.

A seller of goods will be deemed as unpaid, when
1) The whole of the price has not been paid or tendered.
2) The negotiable instrument (Cheque / Bill of exchange / Promissory note.) tendered towards the sale
consideration was dishonored on the due presentation.