Sale of Goods Act, 1930

Sale of Goods was originally a part of the Indian Contract Act 1872.
As times progressed and the complexity in sales and purchases or
rather mercantile transactions increased the existing Act was
considered as needing an upgrade and the Sale of Goods Act as we
know it today took its genesis.
The Sales of Goods Act has principals of offer, acceptance,
consideration, consent, legality etc in common with the Indian
Contract Act. In so far as the provisions align the concepts and
positions under the Indian Contract Act 1872 are held to be applicable
to the Sale of Goods Act 1930 also.
A Transaction under the Sale of Goods Act, 1930 would require a
Seller(s), a Buyer(s), Goods, a consideration for the transactions and
the whole transaction meeting the essentials of a valid Contract
including intent, capacity, legality etc.
Under the Sale of Goods Act 1930 what is a Good?
 Every kind of movable property is a good.
 Stocks,
 Shares,
 Growing crops,
 Grass,
 Things attached to or forming part of the land which are agreed
to be severed before sale.
A Sale of Goods does not however cover actionable claims and
money.
Actionable claim means a claim to a loan. Also money cannot be
bought and sold so money cannot be a good in itself.
Classification of Goods – Goods can be classified as the following.
 Goods

Existing Future Contingent contingent and

Future

Specific Goods

Ascertained Goods

Unascertained or
generic goods

Specific Goods:
When Goods are identified and agreed upon at the time of sale (Sale
here refers to Contract of Sale) they are termed as specific goods.
For ex: A promises to B a set of pens put on the shelf pointing out to
them specifically and identifies them. It is called a transaction of
Specific Goods.
Unascertained Goods: Unascertained goods refers to Goods which
are not separately identified but indicated by description.
For example: A promises to Sell to B, C and D 50, 25 and 30 kilos
respectively of wheat available in the go down. A has not specified
which portion of the whole lot will be sold or has not segregated
them. He merely provides a description of the goods. In such a case
the goods are unascertained goods.
Unascertained Goods can become Ascertained Goods by way of
appropriation. IN the above example A promises to Sell to B 50 kilos
of wheat. For this purpose, A measures 50 kilos of wheat and keeps
them aside in a separate heap. This act of segregation makes them
Ascertained goods.

Future Goods: Goods which need to be manufactured, purchased or

acquired by the seller after making the Contract to sell are termed as
future Goods.
For Ex: X and Y enter into a transaction where X shall purchase 50
bags of Brand X oil from the wholesale market and sell it to Y. IN
this instance the Goods as it is do not exist with X but aligning to the
transaction a future good is being identified for the purpose of the
transaction.

Contingent Goods: Contingent Goods are goods whose acquisition is

dependent on happening or non-happening of some future event.
For ex: A agrees with B to sell the goods once they have reached the
warehouse safely. The condition that the goods need to safely reach
the warehouse makes the goods Contingent Goods.

Case Laws:
In Ferren Vs O’Brien (1883) 11 QBD 21. In a matter on criminal
law and theft of personal property where a question about water in
pipelines came up. The courts held that water in pipelines was an item
which could be stolen and be subject of larceny thereby giving it the
distinguishment of a Good.

In Commissioner of Sales Tax Vs M.P. Electricity Board (1969) 1

SCC 200. On a question if Electricity can be a subject to Sales Tax
and if it is a good. The courts held that Electricity falls under the
ambit(purview/scope/subject matter) of Goods as it can be transferred,
stored alike movable property though it is intangible and cannot be
touched.

In the case of Sunrise Associates Vs Government of NCT of Delhi

(AIR 2006 SC 1908). On a question if a lottery ticket becomes a
subject matter of a Sales as a Good. The court stated that the lottery
ticket was a slip of paper which provided a chance to win a lottery at a
later point of time. The court held that a lottery cannot be treated as a
sale of good but as an actionable claim.
In the case of TCS Vs State of Andhra Pradesh (AIR 2005 SC
371). When the Sales Tax department levied Sales Tax on the sales of
Software it was held by the SC that software can be treated as goods
and thereby can be subject to Sales Tax. This led to the conclusion
that Software is a Good.
A customer gives his tailor a length of suiting and requires him to
make a suit for him, the lining materials and the buttons to be
supplied by the tailor. The contract is one for work and material and
not for sale of goods.

Sale and Agreement to Sell: Distinctions

When a Seller sells and transfers property to the Seller for a
Consideration it is a Sale.
When a Seller and a buyer agree to Sell and buy and effect a transfer
of property at a later date or after completing a set of activities /
meeting obligations then it can be treated as an agreement to sale.
The Sale of Goods Act 1930, however does not distinguish between
Sale and Agreement to Sell separately as both transactions are
classified as “Contracts of Sale”
The distinctions between Sale and Agreement to Sale are as below:

Sale Agreement to Sale

There is transfer of property
from seller to buyer
This is an executed contract
The Buyer gets a right to the
goods upon completion of the
Sale
Risk and property pass
immediately
Remedies by seller if breached
by buyer (nonpayment) is right
of lien or stoppage in transit
Risk of loss falls on buyer even
No transfer of Property
This is an executory contract.
Means both parties are yet to
perform their promises.
There is a right against only the
opposite person when one person
completes their obligation
Risk and property do not pass
immediately
The aggrieved party can sue the
other for damages or non-
performance
Risk of loss falls on seller as
if possession is with seller as ownership has not passed to the
ownership in goods pass. buyer

Distinction between Sale and Hire Purchase agreement.

Sale Hire Purchase
property in the goods is property in the goods passes to
transferred to the buyer the hirer upon payment of the
immediately at the time of last instalment
contract
the position of the buyer is that the position of the hirer is that of
of the owner of the goods a bailee till he pays the last
instalment
the buyer cannot terminate the the hirer may, if he so likes,
contract and is bound to pay the terminate the contract by
price of the goods. returning the goods to its owner
without any liability to pay the
remaining instalments.
the seller takes the risk of any the owner takes no such risk, for
loss resulting from the if the hirer fails to pay an
insolvency of the buyer instalment, the owner has the
right to take back the goods.
the buyer can pass a good title to the hirer cannot pass any title
a bona fide purchaser even to a bona fide purchaser.

Transfer of Property between Buyer and Seller

One of the key elements in a Contract of Sale is transfer of property.
The term transfer here refers to the change of ownership of the good
from the seller to the buyer.
When a transaction of Sales concludes the buyer gets the ownership
of the goods. He has all the rights that an owner can exercise and has
to follow all the obligations.
Possession of Goods is not the same as ownership of Goods.
A while travelling from Bangalore to Mysore purchases 10 bags of
cotton, then he stops at Chinnamani and hands over 10 bags of cotton
to B for safekeeping for one day while A finishes his work at Mysore.
For the period as agreed B is in possession of the goods but A remains
the owner.
 In terms of specified goods, if the goods are in a deliverable
condition then they have to be transferred to the buyer at the
time contract is made irrespective of the payment is made or not.
 If price has to be ascertained or any other aspect to be performed
before the transfer of property is effected, then the sale is said to
have been complete i.e. the transfer of property is said to be
complete when such act is performed. In simpler terms if a
Seller is supposed to have performed an act prior to the delivery
and if the act is not performed the transfer of property and the
sale is not completed. The Seller shall have the liability or will
have to bear the loss due to the non-performance of such an act.
o Simmons Vs Swift (1826) 5 B&C 857 – This is an
example of this scenario. A Stack of bark was the subject
matter of a sale. A price per ton was ascertained. The
sellers and buyers’ agents had to weigh the bark. A part of
the bark was weighed and taken away, a part of it was left
to be weighed. However, a flood occurred and the
remaining bark (unweighted) was taken away by the flood.
The loss of this was upon the seller as the transfer of
property was conditional upon weighing of the bark and
then to be transferred to the buyer.

The intent of the Parties as to when the transfer shall happen and the
associated conditions shall be examined on a case to case basis and
the conduct of the parties in each case to be examined by the court in
cases where there is an issue with transfer of ownership/property of
the goods.

Passing of risk in case of perishable Goods

  This is a special provision with regards to perishable goods.
 If in a sale of perishable goods, if at the time of contracting if
the goods have perished or damaged without the knowledge of
the seller, then the contract is said to be Void. If the goods have
got spoilt or damaged after the Contract of Sale has been agreed
but before the sales has taken place, then the agreement can be
treated as avoidable.
This principle is illustrated in the case of Barrow Lane & Ballard Ltd
Vs Phillip Phillips & Co. Ltd. [1929 1 KB 574]
 700 bags of Chinese groundnuts were the subject matter of the
sale agreed.
 These were stored in a warehouse.
 109 bags had been stolen without the knowledge of the seller
and buyer before the Contract had been formed.
 150 bags were delivered to the buyer by the seller as an initial
part of delivery;
 After the 150 bags were delivered the remaining bags were also
stolen.
 The buyer insisted on the remaining bags to be delivered but the
Seller, but this was not possible to be performed.
Held – The buyer cannot be forced to buy lesser quantity and effect a
Contract of sale.

Duties of Buyer and Seller in a Sale of Goods Contract

When a Contract of Sale is made, the following duties exist for the
Buyer and Seller as per the terms of the Contract made.
Seller Buyer
Seller has a duty to deliver the Buyer has a duty to pay and
Goods accept them
Seller has to be willing to give Buyer has to be willing to pay
possession of the goods to the the price in exchange for
buyer in exchange of price possession of the goods
The above-mentioned distinction is on the basis that payment and
delivery are concurrent conditions unless otherwise agreed.
A Seller has to deliver the goods A buyer has a right to seek
once the buyer requests delivery delivery from seller and obtain
unless there are any conditions such delivery if all the conditions
unmet (if agreed) have been met
If a place of delivery is pre If a place of delivery is pre
agreed between the Parties the agreed between the Parties, the
Seller to make delivery at such buyer can take delivery at such
place. Else Point of Sale is where place. Else Point of Sale is where
the delivery takes place. the delivery takes place.
Time of delivery agreed between the Parties has to be at a
reasonable hour. Else it can be non-effective.
Any expenses associated with Buyer does not have to bear any
the goods to be brought to a expenses associated with the
deliverables state shall be borne goods being brought to a
by the Seller unless otherwise deliverable state unless otherwise
agreed agreed
Delivery to carrier is deemed as Delivery to carrier is deemed as
delivered by Seller unless received by Buyer unless
otherwise agreed otherwise agreed

What are the rights of a Buyer?

 If the Seller delivers a lesser quantity as against the contracted
quantity, then he may reject the sale. If he accepts the delivered
quantity he is supposed to pay for the item at the contracted rate.
 If the Seller delivers a higher quantity as against the contracted
quantity, then he may accept the quantity contracted and reject
the excess. If he chooses to accept the excess quantity he has to
pay the contracted rate. He also has a choice of rejecting the
entire quantity being delivered.
 If the Seller delivers what is Contracted and also adds some
other items not contracted then the Buyer may accept what is
contracted only and reject the rest. He ma also reject the entire
delivery.
The rights of the buyer may vary basis what is contracted between
the Parties. The rights will have to ascertained based on a case-to-
case basis.
 If the buyer has agreed to receive delivery in instalments then he
has to do so unless agreed otherwise
 Buyer has a right to examine the Goods, if there is a chance to
do so.

What are the rights of an unpaid Seller?

An unpaid seller has the following rights in case the goods remain
unpaid by the buyer at the time of contract of sale.
 A Lien – When goods are sold and delivered to a carrier to
deliver to the buyer and the Seller realises he is unpaid then
though the goods are with a carrier for delivery the Seller has a
lien.
o Valpy Vs Gibson 1847 4 CB 837 – When Seller put the
goods with a shipping agent but was subsequently returned
to seller for repacking and retained by Seller on knowledge
that buyer was insolvent. Then Seller had lost his right to
lien.
 Right to stoppage in transit – An unpaid seller has a right on
knowing that the buyer is unable to pay or has not paid as per
the contract has a right to stop the goods in transit.
 Right of resale – IN case of remaining unpaid and the goods
have not been handed over to a carrier or given possession to the
buyer the Seller has a right to re-sell the goods to a different
buyer.
Conditions and Warranty

A Condition is a stipulation or requirement essential to the main

purpose of the Contract. The breach of a condition shall lead to a
right, the right so enjoyed is termed as the right to repudiate the
contract.

A Warranty is a stipulation or requirement ancillary / collateral to the

main purpose of the Contract. The breach of a warranty shall not lead
to a right but leads to a claim to damages.

Conditions
It is a stipulation which is
Meaning essential to the main
purpose of the contract of sale.
On breach of condition a contract
may be repudiated
Ownership cannot be transferred
without fulfilling the conditions
Breach of condition may be
treated as breach of a warranty
Warranty
It is a stipulation which is
Meaning ancillary to the main
purpose of the contract of sale.
On breach of warranty contract is
not breached but damages
become payable
Ownership on goods can be
transferred without fulfilling the
warranty
Breach of a warranty cannot be
treated as a breach of a
condition.

Types of Conditions
 Express Conditions – These are conditions expressly
incorporated in the terms of the contract and could be in an oral
from or in writing.

 Implied Conditions – These are conditions which though not

mentioned in the terms of the Contract are implied due to the
force of law, conduct of the parties, customs and practices
prevalent where the Sale of Goods has happened.

The Implied Conditions in a Contract of Sale are as follows:

 1. Condition to Title – Unless agreed otherwise in a Sale of
Goods either at the time of sale happening or at such time the
possession of goods is happening by such time is it implied
that the Seller has a right to sell the goods. This is possible
only when he is holding a valid title to the goods.

Ex: Niblett Vs Confectioners Materials Co. [1921] 3 KB 387

The Seller sold tins of condensed milk with a label “Nissly
brand”. However, there was another brand “Nestle brand”
who alleged a trademark violation. The Seller had to remove
the labelling and sell the product at a lesser price.

2. Condition as to Description – When a good is sold by the

Seller and purchased by the buyer.
3. Condition as to Sample – When a larger quantity of a good is
sold and purchased by the buyer relying on a sample. The
final product should meet the quality of the sample so
provided by the Seller.
4. Sale by Description as well as sample – When a sale is as per
description as well as sample. The final product must match
such a sample.
5. Condition based on a traditional or customary usage – The
purchase when made based on a traditional or customary
usage the good so sold should be inline with such customary
usage.
6. Condition as to merchantability – The Goods sold should be
of merchantable quality i.e., there should be no defects in the
goods.
7. Condition as to wholesomeness – This applies to food items.
This means that the food items so sold shall be suitable for
consumption. They are not adulterated or expired.
Caveat Emptor – This is a Latin Maxim which means Buyer beware.
This indicates the principle that the Buyer has to be aware when
entering the transaction of a sale of goods and shall exercise all due
caution to check and purchase the goods he is purchasing.