Section 4

Sales of Goods Act 1930

THE UNIVERSITY INSTITUTE OF LAW

PANJAB UNIVERSITY

IN THE PARTIAL FULFILLMENT OF REQUIREMENT FOR THE DEGREE

OF BACHELOR OF LAWS

LLB 2nd SEMESTER 2022-2023

21st APRIL 2023

SUBMITTED TO- PROF. VANDANA A. KUMAR

SUBMITTED BY: NAVROSE SINGH (Roll no. 44/22 - Ludhiana)

 SECTION 4 OF SALES OF GOODS ACT, 1930

Sales of Goods Act, 1930 is the colonial bill introduced in the pre-independent India for

regulating sale for the benefit of merchants in India. Till 1930, all the transactions related to the

sale of goods were regulated by Chapter VII ( Sections 76 to 123) of The Indian Contract Act,

1872.

In 1920, It was felt that the law relating to sales of goods contained in chapter VII of the Indian

Contract Act 1872 was not adequate to meet the growing demands of the society. Some of the

provisions of the act needed reform in the light of new developments in the mercantile economy.

Subsequently, In 1926-27, an exhaustive examination was held by the Legislative department

specifically of the portions of The Indian Contract Act which dealt with the sales of goods.1

The examination led to the formation of a special committee in 1929 which consisted of eminent

legal lumineers to review the draft bill, and the reviewed draft bill was enacted as the Indian

Sales of Goods Act 1930.

The Sales of Goods Act, 1930 sets out the rights and duties of both buyers and sellers in relation

to the sale of goods. The act applies to all types of goods, except for those that are specifically

exempted.

In simpler terms. “Contract of Sale” is a contract by which the ownership of movable goods is

transferred from the seller to the buyer. Section 4 (1) of the Act, defines “contract of Sale” in the

following words-

1
Law Commission Report on Sales of Goods Act 1930, Report no. 8.
“ A contract of Sale of Goods is a contract whereby the seller transfers or agrees to transfer the

property in goods to the buyer for a price”.

Contract of Sale- Section 4 of Indian Sales of Goods Act 1930

Section 4 of the Indian Sales of Goods Act 1930 defines Contract of Sale- Sale and Agreement

to Sell. It is contained in the Chapter II of the Sales of Goods Act which elaborates Formation of

the Contract of Sale.

Section 4 (1) of the Act defines “Contract of Sale” in the following words -

“A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer

the property in goods to the buyer for a price. There may be a contract of sale between one

part-owner and another.”2

KEY FEATURES

Some key features of the Sales of Goods Act, 1930 include:

1. Definition of a contract of sale: The act defines a contract of sale as a contract in which the

seller transfers or agrees to transfer the ownership of goods to the buyer for a price.

2. Conditions and warranties: The act makes a distinction between conditions and warranties.

A condition is an essential term of the contract that goes to the root of the agreement, while a

warranty is a minor term of the contract. If a condition is breached, the buyer has the right to

2
Sales of Goods Act
reject the goods and terminate the contract. If a warranty is breached, the buyer can claim

damages, but cannot terminate the contract.

3. Implied conditions and warranties: The act provides for certain conditions and warranties

that are implied into a contract of sale, even if they are not expressly stated in the contract. For

example, the act implies a condition that the seller has the right to sell the goods, and a warranty

that the goods are of merchantable quality.

4. Transfer of ownership: The act provides rules for the transfer of ownership of goods from the

seller to the buyer. The general rule is that ownership passes when the parties intend it to pass.

5. Remedies for breach of contract: The act provides remedies for breach of contract by either

party. The buyer can reject the goods, claim damages, or claim specific performance of the

contract. The seller can sue for the price of the goods, or claim damages for non-acceptance of

the goods.

Overall, the Sales of Goods Act, 1930 is an important law that provides a framework for the sale

of goods in India, and helps to protect the rights of both buyers and sellers.

Under the act, a "contract of sale" is defined as a contract in which the seller transfers, or agrees

to transfer, the ownership of goods to the buyer in exchange for a price. The act covers both

tangible and intangible goods, as well as specific and generic goods.

The act specifies several implied conditions and warranties that apply to every contract of sale.

These include conditions regarding the quality and fitness for purpose of the goods, as well as

warranties regarding title, quiet possession, and freedom from encumbrances. The act also
provides for remedies in case of breach of these conditions and warranties, such as the right to

reject the goods, claim damages, or seek specific performance of the contract.

Ingredients of Contract of Sale

Following are the ingredients that could be concluded from this definition that, ‘Contract of

Sale’ is a contract where the seller-

A. Transfers or agrees to transfer the property in goods (i.e the legal ownership of the goods) to

the buyer.

B. To the buyer.

C. for a money consideration called the Price.

SECTION 4 (2) OF SALES OF GOODS ACT 1930 - ABSOLUTE OR CONDITIONAL

“A Contract of Sale may be absolute or conditional”

Contract of Sale is Absolute when it is a sale, simply transferring the ownership of goods

absolutely to the buyer.

The Contract of Sale becomes Conditional if there are conditions (precedent or subsequent) to

the contract by the parties. The conditions may have to be fulfilled by the buyer or the seller.
SECTION- 4 (3) -SALE AND AGREEMENT TO SELL

It is to be noted that Contract of Sale is a generic term that contains both - Sale and Agreement to

Sell.

Section 4 (3) explains Sale as- Where under a contract of sale the property in the goods is

transferred from the seller to the buyer, the contract is called a sale.

Section 4 (3) explains Agreement to Sell as - Where the transfer of property in the goods is to

take place at a future time or subject to some condition thereafter to be fulfilled, the contract is

called an agreement to sell.

Requirements for a Valid Sale

For the sale to be a valid sale it needs to the following requirements to be fulfilled -

1. Agreement between the competent parties

The seller and the buyer should be two different people who are competent to make a contract.

Therefore, if a person purchases their own goods, it's not a sale. [State of Gujarat vs Ramanlals

and co.]3 Except when he purchases his own goods in execution of a decree or auction. Also, if

one of the parties is incompetent because of an unsound mind, minor, intoxicated at the time of

entering the contract, the contract stands invalid.

● Sale between one part owner and another.

3
State of Gujarat vs. Ramanlals and co. Air 1965.
A partner and firm may sell each other goods.

2. Consideration has to be in Price i.e in terms of Money.

The Price of the Goods needs to be Certain. No sale can take place without the

ascertained price. Section 2 (10) explains Price as - the money consideration for a Sale of

Goods. Thus, if the goods are voluntarily given by the owner without the price, the

transaction is a gift and is not governed by the Sale of Goods act. Therefore, The price

which is money consideration for the sale of goods constitutes the essence for a Contract

of Sale. It may be money actually paid or promised to be paid.

3. The Subject-Matter of the Contract of Sale is ‘Goods’.

Section 2 (7) of the Act defines the same as under-

Goods means every kind of moveable property other than actionable claims and money;

and, includes stocks and shares, growing crops, grass and things attached to or forming

part of the land which are agreed to be severed before sale or under the contract of sale.

4. Transfer or Agreement to transfer the Ownership of Goods.

The object of a contract of sale must be transfer of property i.e Ownership in goods from one

person to another not merely delivery of possession. According to the Section 2 (11) of the Act, -

“Property” means the general property in goods, and not merely a special property.
Contract of Sale occurs when ownership in goods is transferred and not when mere right of

possession is transferred by way of hire or pledge.

5. Essential elements of Contract must be present

1. Free consent of the parties ( Sections- 13-22 of Indian Contract Act, 1872).

2. Parties must be competent to contract ( Section- 10-12 Indian Contract Act, 1872)

3. For lawful consideration ( Section - 23-23 ICA, 1872)

4. With a lawful object and should not be expressly declared void by law.

SECTION- 4 (4) - AGREEMENT TO SELL BECOMES SALE

An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject

to which the property in goods is to be transferred.