BUSINESS LAW (ONLINE – 1)

SALE OF GOODS ACT- 1930

Definition of Sale

Section 4 of the Sales of Goods Act, 1930 defines a sale of goods as a “contract of
sale whereby the seller transfers or agrees to transfer the property in goods to
the buyer for price”. The term ‘contract of sale’ includes both a sale and an
agreement to sell. A contract of sale is a generic term. Section 4 provides that if the
property in goods is transferred from the seller to the buyer under a contract,
the contract is called a sale. Where the transfer of the property in the goods
will take place at a future time or is subject to some condition which has to be
fulfilled, the contract is called an agreement to sell. Such an agreement to sell
becomes a sale when the prescribed time lapses or the conditions are fulfilled.

Seller – Sec 2 (13)⇒A person, who sells or agrees to sell the goods,.

Buyer – Sec 2 (1)⇒A person, who buys or agrees to buy the goods.

Types of Goods[Section 6]  3 types

1.Existing Goods

Existing goods mean the goods which are either owned or possessed by the seller
at the time of contract of sale.The existing goods may be specific or ascertained or
unascertained as follows:

a) Specific Goods[Section 2(14)]:

These are the goods which are identified and agreed upon at the time when a
contract of sale is made-For example,specified TV,VCR,Car,Ring.

b) Ascertained Goods:

Goods are said to be ascertained when out of a mass of unascertained goods,the

quantity extracted for is identified and set aside for  a given contract.Thus,when
part of the goods lying in bulk are identified and earmarked for sale,such
goods are termed as ascertained goods.

c) Unsanctioned Goods:
These are the goods which are not identified and agreed upon at the time when a
contract of sale is made e.g. goods in stock or lying in lots.

2. Future Goods[Section 2(6)]

Future goods mean goods to be manufactured or produced or acquired by the

seller after the making of the contract of sale.There can be an agreement to sell
only.There can be no sale in respect of future goods because one cannot sell what
he does not possess.

3. Contingent Goods [Section 6(2)]

These are the goods the acquisition of which by the seller depends upon a
contingency which may or may not happen.
Goods – Sec 2 (7)
⇒ Goods mean every kind of movable property.

⇒ Other than actionable claims and money, and it includes.

⇒ You may notice that ‘money’ and ‘actionable claims’ have been expressly
excluded from the term ‘goods’. ‘Money’means the legal tender. ‘Money’ does
not include old coins and foreign currency. They can, therefore, be sold or bought
as goods. Sale and purchase of foreign currency is, however, also regulated by the
foreign Exchange Management Act,

⇒‘Actionable claims’, like debts, are things which a person cannot make use of,
but which can be claimed by him by means of a legal action. Actionable claims
cannot be sold or purchased like goods, they can only be assigned, as per the
provisions of Transfer of property Act.

 Agreement to sell ⇒Where transfer of property in goods takes place

at future date.
 Sale ⇒Where transfer of property in goods takes place at the time of
contract.
Basis of Distinction Sale Agreement to Sell
Contract It is an executed contract. It is an executory contract.
Transfer of property The property in the goods sold passes to
the buyer at the time of contract. It The property passes when it becomes
passes immediately. sale on the expiry of prescribed time
 or the fulfilment of certain conditions.
It takes place at a future time or
subject to fulfilment of conditions.

It creates a right in rem – a right to

Conveyance of property It creates a right in personam – right
enjoy the goods against the whole
against the seller.
world including the seller.

The transfer of risk takes place

immediately. It is related to ownership
and when ownership is transferred, the
Transfer of risk
risk also passes to the person. If there is
loss of goods, it will fall on the buyer
even though the goods maybe in the
possession of the seller.
There is no transfer of risk of loss of
goods as ownership is not transferred.
The loss will be borne by the seller
even though the goods are in
possession of the buyer.

Right of seller in case of Since the property has passed to the The seller can only sue for damages,
breach buyer, the seller can sue the buyer for unless the price was payable at a
price of the goods. particular date.

He can sue the seller for damages. He He can sue the seller for damages
Right of buyer in case of
can also sue the third party who bought only.
breach
those goods for the goods.

Insolvency of seller in He can claim the goods from the He cannot claim the goods but only a
possession of goods Official assignee or Receiver. rateable dividend for the money paid.

The seller has to deliver the goods to The seller can refuse to deliver the
Insolvency of buyer
the Official assignee except where he goods to the Official Assignee or
before paying the price
has a lien over the property. Receiver.
Essential  elements of Contract of sale
 There must be two parties, one seller and other buyer.
 There must be movable goods as subject matter of contract except money
and actionable claim.
 There must be a transfer of property in goods. It means general property.
( ownership)
 Formation of a contract of sell ( offer & acceptance)
 Method of forming contract ( oral or written)
 There must be price involved. Price means money consideration for sale of
goods.
 Terms and conditions of the contract( place,time,mode of delivery etc.)
 Capability of parties ( sound mind, majority)
 Communication between two parties
 The contract of sale may be absolute or conditional
 competency of parties, the legality of object and consideration etc. have
to be present like in any other contract.
 No force / undue influence / misrepresentation
10-09-2020 (RAFI)