Sale of Goods Act 1930

Definitions
• Buyer: Buyer means a person who buys or agrees to buy the goods.
• Seller: Seller means a person who sells or agrees to sell the goods.
• Delivery: Delivery means voluntary transfer of the possession of goods
from one person to another.
• Price: Price means the money consideration for the sale of goods. The
money here means the currency in circulation.
 Definitions
• Goods: 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 a part of the land, which are agreed to be
severed before the sale or under the contract of sale.
• Agreement to Sale: Where the transfer of property in goods takes place at a
future date.
• Sale: Where the transfer of property in goods takes place at the time of
contract.
 Sale of Goods Act 1930
A sale is a contract where a buyer gets ownership over goods for a price. The important
concern for the buyer is to acquire the ownership.
• Sale is a special form of contract. It involves a transaction of goods.
• Let us explore its features with the following case.
• Explore the following four contracts. Identify the type of contract barter, sale, hire and
pledge.
 Sale of Goods Act 1930

Contract 1: Arman contracts to give Manjari his washing machine in exchange for her
television.
Contract 2: Arman contracts to give Manjari his washing machine for a payment of Rs. 10,000.
Contract 3: Arman contracts to give Manjari his washing machine for a payment of Rs. 2,000
and the machine will have to be returned to Arman after a year.
Contract 4: Arman contracts to give Manjari his washing machine for a payment of Rs. 5,000.
In this case, Manjari will be required to return the washing machine whenever Arman repays
Rs. 5,000 with interest.
 Sale of Goods Act 1930
• Contract 1 is barter,
• Contract 2 is sale,
• Contract 3 is hire and
• Contract 4 is pledge.
• A sale is a contract where the ownership of goods is transferred for a price in cash.
In the language of the contract law, a sale is a contract where the consideration
for the buyer is the transfer of ownership and that for the seller is a price in
cash.
 Sale of Goods Act 1930
• In a sale by description, the buyer must get the described goods if he has not
seen the goods and relies on the description alone.
• In a sale by description, where the buyer has seen or examined the goods, the
description would be modified to the extent of the apparent deviations, but
not by latent and hidden defects.
 Sale of Goods Act 1930
• ‘Buyer beware.’ There is no protection for the buyer in relation to the quality
of goods except in the following situations:
a. Goods sold must be of merchantable quality. However, if the buyer has
examined the goods, defects which such examination ought to have revealed
would be exempted from the requirement of merchantable quality.
b. If the buyer has relied on the skill and judgement of the seller, the good
should be fit for the purpose described by the buyer.
• Let us take up the following case to rehearse the concepts explored above.
 Case: Television Sets
Hotel Central Avenue bought 50 television sets from a seller, Shanti Sales. The
purchase order, signed by Hotel Central Avenue, listed the following
description: “Sony, 75 cm screen, original components manufactured in Japan.”
The manager of Hotel Central Avenue had visited the shop and examined the
TV sets that were being delivered to them. With this general background, let us
explore the following situations:
 Case: Television Sets
• Situation 1: The box of the supplied TV sets declared the screen to be of 71 cm.
• Situation 2: One of the supplied TV sets was not working. The hotel called for a
technician to attend to the TV set. When the TV set was opened up, the hotel
realised that the components inside the TV set were made in Korea and not in
Japan.
• Situation 3: The TV sets supplied were in conformity with the description.
However, one of the TV sets was not working.
• Does the hotel have a remedy?
 Case: Television Sets
• In Situation 1, the buyer has examined the goods and he must have noted that the
TV set was of 71 cms. Therefore, the hotel has no claims on the seller.
• In Situation 2, the buyer has examined the goods, however, it would not be apparent
from an ordinary examination that the components inside were Korean and not
Japanese. Thus, the description would hold and the seller would be required to
supply television sets in accordance with the description.
• In Situation 3, the particular set is not of merchantable quality. The buyer has a right
to demand a set of merchantable quality.
 Case: Television Sets
• To summarise the position on sale of goods, to determine whether the buyer has a
remedy in case of defective goods, we would need to ask the following questions:
• Has the buyer relied on the skill and judgement of the seller?
• Is it a sale by description, with or without examination?
• Has the buyer got what was described?
• Is the product merchantable?
• Only when none of the above applies to the situation under consideration, would it
become a case of ‘buyer beware’.
 Sale and Transfer of Ownership: Cases
• A sale is a contract where the ownership of goods is transferred for a price
in cash
• In contract law, a sale is a contract where the consideration for the buyer is
the transfer of ownership and for the seller, a price in cash
• Ownership is an important concern for the buyer as well as the seller. Let us
explore the theme with the following case.
 Case: Sale and Possession
• Identify the owner of the goods and the person who physically possesses the goods, in the
following situations:
Situation 1: Ramesh has given his car to a garage for repairing.
Situation 2: A transport company is carrying the goods belonging to Rubicon Ltd., from one
factory location to another.
Situation 3: A business process centre has hired 10 cars owned by City Passage Pvt. Ltd. for a
year.
Situation 4: A customer has put his jewellery in the locker of a bank.
Situation 5: Ajay has borrowed a book on travel guide belonging to his friend, for his travel
through South India.
 Case: Sale and Possession
• The owner of certain goods is the person to whom those goods ‘belong’ or
who has the exclusive right over them.
• Ownership and possession are different things.
• A person may possess a thing, for example, the garage or the transporter in
the above illustrations, but not own it, while the owner may not have the
physical possession of the goods.
 Case: Ownership and Sale
Akash bought a laptop from Ramesh. One day, after about two weeks, there was a
stranger at Akash’s doorsteps. He introduced himself as Ravi and told Akash that
Ramesh had been his assistant. He had access to his office and computer. While
Ravi was away on vacation, Ramesh had put up an advertisement in the newspaper
to which Akash had responded. On this occasion, Ramesh had represented
himself to be the owner of the computer. In fact, he was very well versed with the
machine and its functions and he sold it to Akash. Ramesh had, thus, sold some
more of Ravi’s things and had then disappeared. Ravi had already informed the
police about this incident. Both, Akash and Ravi agreed that the real culprit was
Ramesh. The dispute, however, was, should Akash keep the laptop and Ravi
recover the money from Ramesh? Or should Ravi be given the laptop and Akash
be made to recover his money from Ramesh? Decide.
• The principle has been that a person can never transfer ownership when he
did not have it in the first place.
• In the above case, Ravi continued to be the owner of the laptop, even if the
laptop came to be in possession of Akash.
• The laptop should be restored to Ravi.
 Case: Fire in a Book Store
Jeet goes to a book store and selects five books. He comes to the cashier and
pays for the books. The cashier packs the books, puts them in a plastic bag and
gives the bag to Jeet. Jeet receives the books and then remembers that he has to
pick up a birthday card for his friend. He requests the cashier to keep the books
with him for 10 minutes. Jeet goes upstairs to the card section. In this while,
there is a fire in the shop and the books get destroyed. Jeet is demanding that
the shop give him the five books from its stock.
 Case: Fire in a Book Store
• The owner is entitled to an exclusive enjoyment of the good.
• The reverse is also true, that is, the loss of the good or damage to it is also to be
borne by the owner.
• In this case, Jeet became the owner of the goods when he received it from the
cashier. Thus, Jeet has to bear the loss.
• An important implication, then, is that risk passes with ownership.
• It becomes important to discern the point at which the ownership gets transferred
to the buyer. Equally important is the rule that only on becoming the owner, can a
buyer sell the goods further.
 Case: Fire in a Book Store
• The principles on transfer of ownership could be summarised as follows.
• Goods must be ascertained and specific for the transfer of ownership to take place.
• In the case of specific and ascertained goods, we should explore whether the
contract provides in express or implied terms, on the passing of ownership. These
terms should be applied.
• In the case of specific and ascertained goods, if the contract does not provide in
either express or implied terms on the passing of ownership, the ownership is
transferred to the buyer when the contract is made.
DISTINGUISH BETWEEN A SALE AND
AN AGREEMENT TO SELL
DISTINGUISH BETWEEN A SALE AND A
HIRE–PURCHASE
DISTINGUISH BETWEEN A CONDITION
AND A WARRANTY
Thanks