NITIKA BACHHAWAT

BUSINESS LAWS

REVISION NOTE
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 THE SALE OF GOODS ACT,
1930

IN FORCE since 1st July, 1930

 Nitika Bachhawat

CONTRACT OF SALE

SELLER
Sale:
ownership is Transfers or Agrees to transfer
transferred
immediately
Agreement to
Property in the sell: ownership
goods is transferred on
a future date
after the
To the buyer fulfillment of
certain
conditions.
For a price
 Nitika Bachhawat

Essentials of a contract of sale

There must be two parties buyer and seller. Buyer is one who buys or agrees
to buy and seller is one who sells or agrees to sell
Subject matter of the contract of sale must be goods. Goods will not include
services
Transfer must take place for a price. Even if the consideration is partly goods
and partly price it is valid.
Transfer must be of general property and not of special property. General
rights mean the ownership rights over the goods and special rights mean
any rights other than ownership rights.
All essentials of a valid contract must be present
 Nitika Bachhawat

Goods

Existing Future Contingent

Goods which are in the
possession of the seller at
the time of contract
Goods which are not in the
possession of the seller but
will be procured or
produced or manufactured
by him after the contract is
made.
Goods the acquisition of
which by the seller depends
upon a contingency i.e. an
event which may or may not
happen

Specific Ascertained Unascertained

Goods which are Goods which are Goods which are
identified and agreed identified and agreed neither identified nor
upon at the time of upon subsequent to agreed upon but a
contract the formation of the mere description of
contract the goods are given
 Nitika Bachhawat

Fixing of price
By agreement By mutual dealings By third parties
If the price is to be fixed by a third party and the third party refuses to fix the price the
contract shall become void.
Where price is not fixed in any of the following manner the buyer shall pay to the seller
a reasonable price for the goods.

Delivery
Voluntary transfer of possession of goods

Actual Symbolic Constructive

Physical possession of the
goods are transferred
Means of obtaining the
possession of the goods
are given. Delivery of a
thing in token of transfer of
something else.
Delivery which any change
in the custody or actual
possession. Delivery by
attornment or
acknowledgment.
 Nitika Bachhawat

Conditions
Title Sample Description Sale and description
In sale seller must i. Bulk must The bulk must i. Sample must be
have the tight to sell correspond to the correspond to the described as it is
in agreement to sell sample description. known in the
on the future date he ii. Buyer must be Description of packing market
must have the right to given an forms a part of ii. Bulk must
sell opportunity to condition as to correspond both
examine the description. to sample and
goods description
iii. Goods must not
have any latent
defect which
make them
unmercantable
Specific purpose of Usage of trade Merchantability Wholesomeness
the buyer i. Goods should be Goods to be in
i. Specifies reason useable or consumable state
of purchase saleable
ii. Depends on ii. Defective packing
seller’s skill makes goods
iii. Seller deals in unmerchantable
those goods iii. Personal ailment
of a person does
not make the
goods
unmerchantable
 Nitika Bachhawat

Warranty
Undisturbed Freedom from Disclosure of Quality and fitness
possession encumbrances dangerous nature by usage of trade
Condition as to title When the seller of the goods Condition as to
treated as a sells good on which In case of quality and fitness
warranty a third party has a dangerous nature by usage of trade
charge and owing to of goods the seller treated as warranty
this charge the shall inform the
buyer suffers any same to the buyer if
damage he can he fails to do so he
recover the same will be liable to the
from the seller buyer for the
damages
 Nitika Bachhawat

Caveat Emptor
Let the buyer beware. It is the buyer’s duty to make the right selection of the goods
he cannot hold the seller liable for his wrong selection.

The rule of caveat emptor does not apply in the following cases:
 under s trade name
By sample
By description
 the goods are un merchantable
 the goods are not wholesome
 the goods are not fit for the buyers specific purpose
 the seller sells the goods to the buyer by fraud
 Nitika Bachhawat

Transfer of property

Property in the Possession of the

Passing of risk: risk
goods: ownership goods: physical
passes with ownership.
of the goods goods
The moment ownership
transfers to buyer risk
passes to buyer. If any
party is at fault the
defaulting party shall
bear the loss.
 Nitika Bachhawat

Time for
transfer of
ownership

Intention of Intention of
the parties is the parties is
not known known

As per the
Specific unascertained
intention
 Nitika Bachhawat

Specific goods Unascertained goods

1. In a deliverable state – ownership is After the goods are ascertained and
transferred immediately. appropriated.
2. Not in a deliverable state – ownership Ascertained – goods answering the
is transferred after they are brought to description are identified and set apart.
a deliverable state and the buyer is Appropriation – selection of the goods
informed. with the consent of both the parties for
3. If the seller has to conduct certain the performance of the contract
tests over the goods – ownership is
transferred after such tests.
4. If the buyer has to conduct the tests
the ownership is transferred
immediately.

Sale on approval becomes a sale in the following conditions:

1. Buyer gives his consent to purchase the goods
2. Does not give consent but retains the goods without giving notice of rejection
within the specified time or if no time specified within reasonable time.
3. Does any act which is in consistent with ownership.

Sale on approval on cash basis ownership is transferred only after the cash is paid.
 Nitika Bachhawat

Nemo dat quod non habet:

No one can give what he has not got. Exception this rule are:

sale by a mercantile Sale by one of the Sale by person in Sale by estoppel:

agent: joint owners: possession under a owner lets the buyer
1. Acting in ordinary 1. One of the joint voidable contract: believe that the seller
course owner has 1. Possession under has a right to sell the
2. Possession with possession of the a voidable goods
the consent of goods with the contract
owner consent of owner 2. Sells to bonafide
3. Sells to bonafide 2. Sells to bonafide purchaser
purchaser. purchaser

Sale by a person Sale by an unpaid

Sale by a person in before sale: seller: Sale under other Acts:
possession after sale: A person has the An unpaid seller after 1. Pawnee or
person has the possession of the exercising his rights of pledgee of goods
possession of the goods and not the lien and stoppage 2. Finder of the
goods or document of ownership sells them may resell the goods goods
title after selling the to a bonafide 3. Sale by official
goods and resells purchaser sale is valid assignee or
them the sale is valid. .liquidator
 Nitika Bachhawat

Rules of delivery

1. Delivery of goods is made by doing anything which parties agree shall be treated as
delivery .
2. Delivery of part shall be deemed to delivery of the whole of the goods. Intention to
severe shall not be deemed to delivery of whole.
3. Duty of buyer to apply for delivery
4. No specific contract, goods must be delivered at the place at which they were at the
time of sale in case of sale and the place they were at the time of agreement to sell
in case of an agreement to sell.
5. The delivery must be made within a reasonable time.
6. If goods in possession of third party delivery will take place only when the third party
acknowledges that he is holding the goods on behalf of the buyer.
7. Demand or tender for delivery shall be made at a reasonable hour.
8. The expenses of putting the goods into a deliverable state must be borne by the
seller.
9. If the seller delivers goods less than contracted for the buyer may reject or accept, if
he accepts he will pay for the lesser quantity.
10. If the seller delivers goods more than contracted for the buyer may reject or accept
the whole or accept the relevant and reject the rest. If he accepts the whole he shall
for the total goods at the contract rate.
 Nitika Bachhawat

11. If seller delivers goods mixed with goods of different description buyer may accept
the goods which are in accordance and reject the rest or reject the whole
12. Buyer is not bound to accept installment delivery unless otherwise agreed.
13. Delivery of goods to the carrier is deemed to be a delivery of the goods to the buyer.
14. Deterioration of goods which are incidental to the course of transit and the goods
are sent to distant place shall be borne by the buyer even if the seller agrees to
bear it.
15. If the goods were not previously examined by the buyer he shall have a right to
examine them before accepting the delivery.
 Nitika Bachhawat

Rights of an unpaid seller

Rights against goods: Rights against the buyer:

1. Rights of lien: if after selling the goods seller 1. Right to sue for price
has the possession and becomes unpaid can 2. Right to sue for interest
retain the goods with himself. Lien comes to 3. Right to sue for damages for
an end in case of: non acceptance of goods
 Goods sent to carrier 4. Right to sue for breach of
 Buyer tenders the payment contract.
 Buyer or agent lawfully acquire the
goods
 Estoppel or waiver
2. Rights of stoppage in transit: seller has
dispatched the goods to carrier and
becomes unpaid due to buyers insolvency
can stop the goods from being delivered.
Right comes to an end when the goods reach
the buyer.
3. Right to resell: may resell after giving a
notice to the buyer and wait for a reasonable
period of time.
 Nitika Bachhawat

Rights of buyer

Damages for no Sue for specific Sue for damages: Sue for price:
delivery og goods: performance: In 1. When there is 1. When there is
if the seller case of a breach of a breach of
wrongfully refuses ascertained or warranty; or condition
or neglects to specific goods the 2. Breach of 2. Money paid in
deliver the goods. buyer can sue the condition advance and
seller for specific treated as a the contract is
performance if the breach of not performed
goods have no warranty then a refund
substitute. of the advance
money.
 Nitika Bachhawat

Auction sale
1. Is an invitation to offer.
2. Sale is complete on the fall of the hammer.
3. Where the goods are put up for sale in lots, each lot is deemed to be a separate
contract of sale.
4. Bidder may retract his bid before the fall of the hammer.
5. Seller or his agent may bid at the auction if he has reserved the rights to bid.
6. If he bids without reserving rights the sale is voidable.
7. If the seller appoints more than one bidder for pretended bidding the sale is
voidable.
8. The sale may be subject to a reserve or upset price.
9. An agreement between two or more bidders not to bid against each other i.e.
knockout agreements is against public policy and hence void.