SOGA

1 Sale of Goods Act, 1930
Introduction
The Sale of Goods Act, 1930, is a mercantile law that came into existence during British Government.
It is an Act to define and amend the law relating to the sale of goods. The Sale of Goods Act, 1930,
contains 66 Sections in seven Chapters. The Act provides for the provisions for the formation of the
contract, effect of the contract, performance of the contract, rights of unpaid seller against the goods,
provisions of suits for breach of the contract, and further procedures. Section 65 of the Act has been
repealed.
History
The Sale of Goods Act, 1930, was passed by the Legislature and assent was given on 15 March 1930.
This Act came on the statute book as the Sale of Goods Act, 1930, (Act 3 of 1930) and came into force
on 1 July 1930. The earlier Act was English Sale of Goods Act, 1893, and the provisions of the 1930 Act
are mainly borrowed from the 1893 Act. Earlier it was named the Indian Sale of Goods Act, 1930, and
the word ‘Indian’ was omitted later. The Act was amended in 1963, and was renamed as the Sale of
Goods Act, 1930. In India, it was enacted by the Imperial Legislative Council on the report of the First
Law Commission.
Applicability of the Act

The Sale of Goods Act, 1930, extends to the whole of India.
Section 3 of the Act, application of provisions of Act 9 of 1872, the un-repealed provisions of the Indian
Contract Act, 1872, save insofar as they are inconsistent with the express provisions of this Act, shall
continue to apply to contracts for the sale of goods.
Section 66 of the Act: Savings Clause

(1) Nothing in this Act or in any repeal effected thereby shall affect or be deemed to affect:
(a) any right, title, interest, obligation, or liability already acquired, accrued or incurred before the
commencement of this Act, or
(b) any legal proceedings or remedy in respect of any such right, title, interest, obligation or liability,
or
(c) anything done or suffered before the commencement of this Act, or
(d) any enactment relating to the sale of goods which is not expressly repealed by this Act, or
(e) any rule of law not inconsistent with this Act.
(2) The rules of insolvency relating to contracts for the sale of goods shall continue to apply thereto,
notwithstanding anything contained in this Act.
(3) The provisions of this Act relating to contracts of sale do not apply to any transaction in the form
of a contract of sale which is intended to operate by way of mortgage, pledge, charge or other security.
Objective of the Act

The Sale of Goods Act, 1930, is an Act to define and amend the law relating to the sale of goods.
‘Goods’ for the purpose of this Act is defined in sub-section (7) of Section 2, it states that “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 part of the land which are agreed to be severed before
Sale of Goods Act, 1930 1

sale or under the contract of sale”. This Act was primarily introduced to govern the contracts relating
to sale of goods.
Statement of Objects and Reasons

The Bill is sufficiently explained in the Report of the Special Committee printed below.
2. The Committee assembled at Shimla on 29 April 1929, when its first meeting was held and continued
its deliberations daily until 9 May 1929. A Bill to amend and define the law relating to the sale of
goods, with the notes setting forth the reasons for the proposed amendment which had already
been prepared in the Legislative Department of the Government of India was placed before us, and
formed the basis of our discussions.
3. Before the passing of the Indian Contract Act, 1872, Chapter VII of which contains the law relating
to the sale of goods or movables, the law on this subject was not only not uniform throughout
British India but was also outside the limits of the original jurisdiction of the High Courts, extremely
uncertain in its application. Within the limits of the Presidency-towns, the rules of English law,
including those in the Statute of Frauds, were applied, whilst in the Mofussil it was doubtful
whether the Statute of Frauds was applicable and as observed by the Indian Law Commissioners
in their Second Report, the Judge was to a great extent without the guidance of any positive
law beyond the rule that his decision should be such as he deemed to be in accordance with
“justice, equity and good conscience”. To remedy this unsatisfactory state of affairs the Indian Law
Commissioners framed in their Second Report, dated 28 July 1866, a set of rules relating to the
general law of contracts including therein provisions relating to the sale of movables. The draft of
the Law Commissioners underwent several changes at the hands of the then Law Members, Sir
Henry Maine and Sir James Stephen, and also in the Select Committee of the Indian Legislature.
But, as stated by Sir James Stephen himself while presenting the Report of the Select Committee
on the Indian Contract Bill, the Chapter on the sale of goods, except in regard to the rule as to
market overt, represented generally the English law on the subject as it then stood.
4. The rules of English law relating to the sale of goods had grown up mainly out of judicial decisions.
Along with the general law of contract, they were the product of many generations and were
adapted to the circumstances and exigencies of the times and the dealings of the people. They
were, however, largely dominated by the provisions of the Statute of Frauds which was passed in
the reign of Charles the Second. The Law Commissioners, as well as those who were ultimately
responsible for framing the Indian Contract Act, at once realised that the provisions of the Statute
of Frauds, although followed in the Presidency-towns, were not suitable to the conditions prevailing
in this country, and that “any law relating to this important subject must at any rate be free
from the inexpressible confusion and intricacy which is thrown over every part of the Statute in
consequence of its vague language”.
5. In 1870, various branches of law were being codified in British India. The main object in view was, in
the words of Sir James Stephen, “that of providing a body of law to the Government of the country
so expressed that it might be readily understood both by English and Native Government servants
without extrinsic help from the English law libraries”. What was urgently needed was a guide for
the judge or magistrate who had but little legal training, derived little or no assistance from the
Bar and worked at a distance from any law library.
6. Whatever merit the simple and elementary rules embodied in the Indian Contract Act may have
had and however sufficient and suitable they may have been for the needs which they were
intended to meet in 1872, the passage of time has revealed defects the removal of which has

become necessary in order to keep the law abreast of the developments of modern business
relations. The law relating to the sale of goods appertains mainly to mercantile transactions. There
can be no doubt that during the last half-century conditions in this country relating to trade and
business have undergone material changes. Methods of business, have largely altered and new
relations have arisen between man and man. In dealing with these relations, it has been necessary
to give recognition to new principles and the Indian Courts have found that a law enacted more
than 50 years ago is entirely inadequate to enable them to deal with these new regulations or give
effect to the new principles. The result has been that on various occasions the courts have had to
hold that Chapter VII of the Indian Contract Act is not exhaustive, and to import therein analogies
from the decisions of the English Courts.
7. The English law relating to the sale of goods which was admittedly the basis of Chapter VII of
the Indian Contract Act has itself since 1872 undergone drastic changes and was finally codified
in 1893 by the present Sale of Goods Act (56 and 57 Vict., C. 71), which discards many of the old
common law rules upon which Chapter VII of the Indian Act was based in favour of provisions more
suited to modern conditions or more convenient in actual practice.
8. By the Bill referred for our consideration, the law relating particularly to the sale of goods is
embodied in a separate enactment, although many of the general principles contained in the
Indian Contract Act will continue to be applicable thereto. When Sir James Stephen moved the
Indian Contract Bill, he admitted that it was not and could not pretend to be, a complete code
upon the branch of law to which it related. He, however, expressed a hope that in later years it
would be easy to enact supplementary chapters relating to the several branches of the law of
contract which the Bill did not touch. This hope has never been fulfiled. In later years it was found
more convenient to have separate enactments for the several branches of the law of contract,
e.g., the Transfer of Property Act, the Negotiable Instruments Act, and the Merchant Shipping Act.
In our opinion in view of the complexity of modern conditions, the time has now come when this
process should be accelerated by embodying the different branches of law relating to contract in
separate self-contained enactments; and we hope that the Bill which we attach to our Report may
be passed into law at an early date and may be but the first of the series required to complete the
task which we have outlined above.
9. The Bill referred to us was mainly based on the English Sale of Goods Act, 1893. This Act has
stood the test of nearly 35 years of practical application, and in the words of Lord Parker in Re
Parchim, (1918) AC 157 at pages 160–161, “is a very successful and correct codification of this
branch of the mercantile law”. As is shown in Appendix B to our Report, most of the Colonies and
Overseas Dominions have adopted and re-enacted the Act with only such small variations as have
been found necessary to adopt its provisions to local circumstances. It is also remarkable, that
the Uniform Sales Act, passed in 1906 in the United States of America and adopted in 20 out of
53 states and territories is based very largely on the English Act. These facts constitute striking
evidence of the completeness and the universal suitability of its provisions.
10. In mercantile transactions a conflict of laws should, as far as possible, be avoided. Uniformity
of law in various countries, particularly in those which have business or trade dealings with one
another, is highly convenient and desirable. We, therefore, approve of the proposal to adopt the
provisions of the English Sale of Goods Act so far as they are suitable to Indian conditions as the
basis for the present Bill, and thus to make the Indian Law relating to the sale of goods as nearly
as possible uniform with the law in force in other parts of the British Empire.

11. The provisions of the English Act are far more elaborate and comprehensive than those of Chapter
VII of the Indian Contract Act, and in their arrangement the English Act is more logical and
methodical. As we have already observed, it has revised and brought up to the date rules of the
English Common Law. Moreover, the adoption of the English Act as the basis of present Bill will
enable Indian Courts to interpret its provisions in the light of the decisions of the English Courts.
12. In adopting the provisions of the English Act, we have not been unmindful of the needs and
exigencies of this country. Wherever it has been found that a rule obtaining in England, such
as that relating to market overt is not suitable to Indian conditions, the rule has been rejected.
We, have, moreover, carefully scrutinised the provisions of the English Act in the light of the
decisions of English Courts since 1893, and where those decisions have shown the provisions of
the English Act to be defective or ambiguous, we have attempted to improve upon them. We have
also retained several of the provisions of the Indian Contract Act, which we consider necessary or
useful to meet special conditions existing in India. The Bill as revised by us on the above lines is
attached to our Report.
13. A detailed explanation of the various clauses of the Bill is set out in our notes in Appendix C. But
we think it desirable to draw attention to the following few points of importance:
a. The present Bill embodies the principles that the question whether a contract for the sale of
goods does or does not pass the property in the goods from the buyer to the seller must in all
cases be determined by the intention of the parties to the contract. The provisions of Chapter
VII of the Indian Contract Act are vague and conflicting on this point. The Bill codifies the rules
by which that intention may be ascertained, but the operation of these rules will be displaced
by any terms of the contract defining the intention or by any attendant circumstances, including
the conduct of the parties, rendering it ascertainable. In following this principle, we have borne
in mind that in mercantile matters the certainty of the rule is often of more importance than
the substance. If the parties know before-hand what their legal position is, they can provide
for their particular wants by express stipulation. Sale, after all, is a consensual contract, and
the Bill does not prevent the parties from making any bargain they please. Its object is to lay
down clear rules for the cases where the parties have either framed no intention or failed to
express it.
b. The distinction between a sale and an agreement to sell which was not clear in Chapter VII
of the Indian Contract Act, has been clearly brought out. This distinction is very necessary to
determine the rights and liabilities of the parties to the contract.
c. It is made clear that a contract of sale can be made by mere offer and acceptance. Neither
payment nor delivery is necessary for the purpose.
d. Before 1893 the law in England relating to warranties and conditions was in a very confused
state. In the Indian Contract Act the word warranty has been used in a very vague sense. In
some provisions, it denotes a condition which would enable a party aggrieved by its breach to
repudiate the contract while in others it enables him to claim damages only. In the Bill this
ambiguity has been removed.
e. There is much conflict of decisions in India regarding the meaning of Section 108 of the Indian
Contract Act, which relates to sales by ostensible owners. This is to a certain extent due to the
obscure phraseology of the Section itself. We have tried to remove this obscurity in Clauses 27
to 30 of the Bill to simplify the law on the subject.
f. We have elaborated the rules relating to delivery to carriers, stoppage in transit and auction
sales.

g. We have anxiously considered the question of the retention of the Illustrations appearing in
Chapter VII of the Indian Contract Act and of the insertion of Illustrations to new provisions.
Our decision is that the better policy is to forego all illustrations, leaving the courts to construe
the sections as they stand.
List of Amending Acts and Adaptation Orders

1. The Repealing Act, 1938 (Act 1 of 1938)
2. The Indian Sale of Goods (Amendment) Act, 1940 (Act 41 of 1940)
3. The Indian Independence (Adaptation of Central Acts and Ordinances) Order, 1948
4. The Adaptation of Laws Order, 1950
5. The Part B States (Laws) Act, 1951 (Act 3 of 1951)
6. The Indian Sale of Goods (Amendment) Act, 1963 (Act 33 of 1963)
7. The Multimodal Transportation of Goods Act, 1993 (Act 28 of 1993)
8. The Jammu and Kashmir Reorganisation Act, 2019 (Act 34 of 2019)
Points to Remember !
y The Sale of Goods Act is a mercantile law.
y Earlier, the Sale of Goods Act was contained in Chapter 7 of the Indian Contract Act.
y The Sale of Goods Act, 1930, was borrowed from the English Sale of Goods Act, 1893.
y Contract of sale is a contract for sale by sample where there is a term in the contract, express
or implied, to that effect.
y Caveat emptor is an integral part of the Sale of Goods Act.
y Caveat emptor means let the buyer beware.
y Doctrine of caveat emptor is enshrined in Section 16.
y Actionable claim and money will not be considered part of goods.
y Condition is a stipulation essential to the main purpose of the contract, the breach of which gives
rise to a right to treat the contract as repudiated.
y Warranty is a stipulation collateral to the main purpose of the contract, the breach of which
gives rise to a claim for damages but not to a right to reject the goods and treat the contract as
repudiated.
y Warranty may be implied warranty or expressed warranty.
y Where there is a contract for the sale of unascertained goods, no property in the goods is
transferred to the buyer unless and until the goods are sanctioned.
y Existing goods, contingent goods and future goods are the types of goods.
y There can be a contract of sale between one part owner and another.
y Seller will be called an unpaid seller even when a small part of price remains to be unpaid.
y Right of lien is the right to retain possession of the goods until payment for the same is made.
y Right of lien is a right which is available to the unpaid seller having possession of the goods if the
goods have been sold without any stipulation as to credit or they have been sold on credit, but
the term of credit has expired.

Quick View of Law Charts
The Sale of Goods Act, 1930
Preliminary Contract Formation Effect of

Contract
Buyer The Contract Goods Stipulation Implied or

means a unrepealed of sale which in a Express Where there Goods Expression
person who provisions of may be form the contract of warranty is a contract sent on ‘railway’
buys or the Indian absolute subject of sale with (Section for the sale of approval and ‘railway
agrees to Contract or a contract reference 16) unascertained or ‘on administration’
buy goods; Act, 1872 conditional of sale to goods goods, no sale or shall have
delivery save insofar (Section 4) may be which property in return’ the meanings
means as they are either are the the goods is (Section respectively
voluntary inconsistent existing subject transferred 24) assigned to
transfer of with the goods, thereof to the buyer them under
possession express owned or may be a unless and the Indian
from one provisions possessed condition until the Railways Act,
person to of this by the or a goods are 1890
another Act, shall seller, or warranty sanctioned (Section 25)
(Section 2) continue future (Section (Section 18)
to apply to goods 12)
contracts (Section 6)
for sale of
goods
(Section 3)
Performance of Contract Rights of Unpaid Seller Suit, Specific Performance
It is the duty Delivery of Rules Right of Seller may exercise Where Where
of the seller to goods sold related to resale as his right of lien the buyer the seller
deliver the goods (Section delivery limited by notwithstanding that wrongfully wrongfully
and of the buyer 33) (Section this Act he is in possession of neglects or neglects or
to accept and 36) (Section the goods as agent or refuses to refuses to
pay for them, in 46) bailee for the buyer accept and pay deliver the
accordance with (Section 47) for the goods, goods to the
the terms of the the seller buyer, the
contract of sale may sue him buyer may sue
(Section 31) for damages the seller for
for non- damages for
Part Termination Right of acceptance non-delivery
delivery of of lien stoppage (Section 56) (Section 57)
the goods (Section 49) in transit
Provisions of The buyer Risk where
(Section (Section
this section of goods is goods are
48) 50)
are subject to not bound delivered Specific Remedy
any usage of to accept at distant performance (Section 59)
trade, special delivery place (Section 58)
agreement or thereof by (Section
course of dealing instalments, 40)
between the unless agreed
parties (Section 38)
(Section 37)

Subjective Theory
The Act was formulated with the objective to transfer property from one person to another. Originally
the law relating to the sale of goods was contained in Section 76 to Section 123, Indian Contract Act,
1872. Subsequently, with the passage of time and development of trade and commerce, the Act was
repealed and the law is now codified in an enactment called the Sale of Goods Act, 1930. It contains
all the rules and regulations relating to various types of contracts of sale of goods.
Key Features
It deals with movable goods.
y The subject of transfer of property other than an agricultural land falls in the Concurrent List at Entry
7 of the seventh schedule.
y It deals with ‘sale’ but not with the pledge or mortgage.
y It deals only with goods but not with other movable property. For example, money and actionable
claims.
Goods
Section 2(7) of the Act defines goods in the following manner.
“Goods means every kind of movable property other than actionable claims and money, and includes
stocks and shares, growing crops, grass and things attached to or forming part of land which are
agreed to be severed before sale or under contract of sale.”
Stock and Shares

In AMP Arunachalam versus AR Krishna Murthy, [1979 (49) Comp Cases 662 (670)], it was held that
exhaustive definition of ‘goods’ in the Indian Act makes it clear that even stock and shares can be
treated as goods and dealt with as such.
Lottery Tickets
In H Anraj versus Govt of Tamil Nadu, [AIR 1986 SC 63], it has been held that the lottery tickets are
goods and not actionable claims, therefore, the levying of tax on the sale of lottery tickets would be
valid as it is following within the legislative competence of the concerned state legislature.
Debentures
In RD Goyal versus Reliance Industries Ltd, [(2003) 1 SCC 81], the Supreme Court held that a debenture
would not come under the purview of goods. They would come under the purview of actionable claims
as defined under Section 3 of the Transfer of Property Act, 1881.
Type of Goods
Goods which form the subject matter of any contract of sale can be classified into various categories.
Goods
Existing goods Contingent goods Future goods

(Section 6) [Section 6(2)] [Section 2(6)]
Specific goods Ascertained Unascertained

[Section 2(14)] goods goods

Existing Goods
These are those goods that are owned or possessed by the seller at the time of contract of sale. The
existing goods may be further classified into the following categories.
y Specific goods
y Ascertained goods
y Unascertained goods
Specific Goods
These are those goods that are identified and agreed upon at the time when the contract of sale is
made. Actual sale can take place only if specific goods pass from seller to buyer at the time of the
contract and are in deliverable state. For specific goods, it is necessary that such goods must be
identified and agreed upon at the time of making contract and not subsequently. The contract must be
unconditional.
Ascertained Goods
The goods that are identified only after the formation of the contract of sale are known as ascertained
goods. When unascertained goods are identified and agreed upon by the parties, the goods are called
ascertained goods.
Unascertained Goods
y Unascertained goods are also known as generic goods.
y They are identified only by description.
y These are goods that are not identified and agreed upon at the time of contract is made.
y No property can be transferred so long as the goods are unascertained.
y With respect to ascertained goods, the maxim genus numquam perit meaning ‘a generic thing never
perishes’ would apply.
Future Goods
The Act defines future goods under Section 2(6) in the following manner.
“Future goods means goods to be manufactured or produced or acquired by the seller after making of
the contract of sale.”
It is to be noted that Section 6(1) of the Act makes it possible for a person to sell or offer to sell future
goods. As future goods are not in possession of the seller at the time of contract, they can become the
subject matter of an agreement to sell and not the contract of sale.
Contingent Goods
Contingent goods are those goods whose acquisition by the seller depends on a contingency which
may or may not happen. A contract for sale of contingent goods also operates as an agreement to
sell. Such contract is enforceable only at the occurrence of the contingency, otherwise the contract
becomes void.

Contract of Sale
It is the contract by which the ownership of movable goods is transferred from seller to buyer. Section
4(1) of the Act defines contract of sale.“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.”
The expression contract of sale is generic term and includes both sale and agreement to sell [Section
4(3), Sale of Goods Act, 1930].
Sale Contract of Sale
It is where the ownership of goods is to be

It is where the seller transfers the ownership of
transferred at a future time or subject to some
goods to the buyer.
conditions to be fulfiled later on.
Section 21 and 24, Sale of Goods Act, 1930,

Section 20 of the Sale of Goods Act, 1930, deals
deals with the agreement to sell, i.e., the
with the sale.
contact of sale.
Essential Elements of Contract of Sale

Section 4(1) of the Sale of Goods Act, 1930, prescribes for the essential conditions to be fulfiled for
valid contract of sale.
y Existence of Minimum Two Parties
A contract of sale is contract between two individuals, i.e., buyer and seller, as defined in Section
2(1) and Section 2(13) of the Act respectively. Seller is defined as a person who sells and agrees to
sell goods whereas buyer is defined as a means a person who buys and agrees to buy the goods.
It is to be noted that buyer and seller must be two different persons, no one can sell the property
in goods to himself, nor he can buy his own goods. In State of Gujarat versus Ramanlal and Co, [AIR
1965 Guj 60], it was been held that if a person purchases his own goods, it is no sale except when
he purchases his own goods being sold in execution of decree.
y Transfer or Agreement to Transfer the Ownership of Goods
The object of a contract of sale must be transfer of property is goods from one person to another.
Section 2(11) of the Act defines property. It states that property means general property in goods
rather than mere special property.
General Property Special Property
It means only some of rights. For example, right to use and

It means ownership.
possess.
y Subject Matter of Contract Must Be Goods
It is to take note that the Act applies to movable goods only.
y Consideration Has to Be Price
Section 2(10) of the Act states that ‘price’ means the money consideration for a sale of goods. Price,
i.e., money, constitutes the essence for a contract of sale, i.e., no sale can take place without price.
Absolute and Conditional Sale

Section 4(2) of the Act prescribes that a contract of sale may be absolute or conditional.

Contract of Sale
Absolute Conditional
Condition precedent Condition subsequent
Absolute Condition Precedent Condition Subsequent
It is pure and simple sale, It is where goods are delivered It is where there is an actual
transferring the property to the buyer on approval, i.e., sale, passing the property
absolutely to buyer. on sale or return basis. to buyer, but subject to the
defeasance on happening of
some specified event.
Q. When does an agreement to sell become a sale?
Section 4(4) of the Act explains the circumstances when an agreement to sell becomes sale. They are
as follows.
y Where an agreement to sell provides that the ownership of the goods shall be transferred at some
future date, it becomes sale when the date arrives (future goods or agreement to sell in future).
y Where an agreement to sell provides that ownership of goods is to be transferred on the fulfilment
of some conditions, it becomes sale when those conditions are fulfiled (conditional sale).
Q. Distinction between sale and agreement to sell.
Sale Agreement to Sell
It is an executed contract. It is an executory contract.
It creates right in rem. It creates right in personam.
If the buyer commits a breach, the seller can If the buyer commits a breach, the seller can
sue for the price of goods, since ownership has sue for the damages, since the ownership has
passed. not passed to the buyer.
If the seller wrongfully re-sells, he becomes The seller may re-sell the goods to third party,
guilty of conversion and the buyer can recover but in that case, the buyer can claim damages
the goods from the third person. from him.
If the goods are lost by accident, whilst in If the goods are lost by accident, whilst in
possession of seller, the loss will be that of buyer’s possession, the loss will be that of
buyer. seller.
Q. Distinction between contract of sale and hire purchase.
Contract of Sale Hire Purchase
The essence of sale is that the property is It is a contract for hire, but in addition it gives
transferred from the seller to the buyer for a the hirer an option to purchase the goods at the
price. end of the hiring period.

Section 4(1), Sale of Goods Act, 1930 Section 2(c), Hire Purchase Act, 1972
It is an agreement to buy in contract of sale. The hirer is not a buyer who buys or agrees to
buy.
The buyer becomes the owner of goods and has The hirer is only a bailee of goods.
all the rights of an owner.
The buyer cannot terminate the contract and is The hirer has no obligation to buy and cannot
bound to pay the price. be compelled to buy.
Sales tax can be imposed. Sales tax cannot be imposed.
Conditions and Warranties
Stipulation
Conditions (Essentials) Warranties (Collateral)
Implied Express Implied Express
Implied Condition Express Condition Implied Warranty Express Warranty
Assumed by law Stated definitely Assumed by law Stated definitely

unless the parties or custom unless
agree to contrary the parties agree to
contrary
Key Points
y Stipulations
The statement may amount to stipulation, forming part of contract or mere expression of opinion
which is not a part of contract. If it is a statement by the seller on reliance of which buyer makes a
contract, it will amount to stipulation.
y Condition
If a stipulation forms the very basis of contract, it is condition.
y Warranty
If a stipulation is not the main purpose of contract, i.e., it is collateral to main purpose of contract,
it is warranty.
Stipulation as to Time (Section 11, Sale of Goods Act, 1930)

The provision lays down that in respect of contract of sale, stipulation as to time of payment is not
deemed to be the essence of contract. The general rule is that contract for performance of which no
definite time period is specified, the performance of contract must be carried out within reasonable
time and when the period is specified, then the contract must be performed with in that specified
time. In British Paints (India) Ltd versus Union of India, [AIR 1971 Cal 393], the Court observed that a

stipulation as to time can be shown not to be the essence of contract, but the burden of showing this
would lie on the party assenting to it.
It is to take note that the provision enshrined under Section 55(1), Contract Act, 1872. It comes into
picture when the time is the essence of the contract. It reads as follows.
“When a party to contract promises to do a certain thing at or before specified time, and fails to do
anything at or before specified time, the contract or so much of it has not been performed becomes
voidable at the option of the promise, if the intention of the parties was that time should be of essence
of the contract.” The applicability of Section 11 of the Act depends on the following conditions:
y language of agreement,
y nature of property sold, subject to contrary intention of parties,
y conduct of parties, and
y surrounding circumstances at or before the contract.
Stipulation as to Time
Stipulation as to Time of Payment Stipulation as to Performance of Other
The general rule is that time is not deemed The element of time is the essence of the
to be the essence of contract unless contrary contract of sale. If the time of delivery is
intention appears in the contract of sale. mentioned in the contract of sale and seller
makes the delay, the contract is voidable at the
option of the buyer.
Section 12 of the Act enumerates the condition and warranty as the stipulation in a contract of sale
with respect to goods.
Conditions
y Section 12(2) of the Act speaks about the conditions as the stipulation in a contract of sale of goods.
y It is a stipulation essential to the main purpose of the contract.
y Its breach gives right to the buyer to repudiate the contract. The buyer has the option to claim
damages, instead of repudiating the contract.
y It goes directly to the root or substance of the contract.
Warranty
y The provision enshrined under Section 12(3) of the Act deals with the warranty as the stipulation in
a contract of sale of goods.
y It is the stipulation collateral or secondary to the main purpose of the contract.
y It is not vital to the existence of the contract.
y The aggrieved party cannot repudiate the contract but can only claim damages.
Circumstances under When Conditions to Be Treated as Warranty

1. Voluntary waiver of condition [Section 13(1)]
On a breach of condition by the seller, the buyer has no right to treat the contract as repudiated
and reject the goods, but instead, he may elect to waive the condition, i.e.,
a. to treat as warranty,
b. to accept the goods, and
c. sue the seller for damages of breach of warranty.

2. In case when contract is not severable in nature [Section 13(2)]
Where the buyer has accepted the goods or part of it and, subsequently, he comes to know of the
breach of condition, he cannot reject them, but he can only maintain an action for damages. Where
the buyer has a right either to accept or reject the goods and he chooses to accept them, his right
of rejection can no more be exercised.
3. Performance of contract is excused by law [Section 13(3)]
The seller may be excused from performing his part of contract in case of performance is excused
by law. In such case, buyer will have no right to claim damages.
Q. Critically examine the statement ‘once a contract, always a contract’.
When the condition is reduced to the status of warranty, the effect is not that the condition becomes
a warranty. It is to be noted that it is only the remedy which changes and the condition remains
condition.
Implied Condition
Implied condition implies when the law infers its existence as implicit in the contract even without it
actually having been put in the contract. Parties do not have the right to exclude any of the implied
condition or warranty by specifically or expressively providing otherwise.
Implied Condition to Title/Ownership [Section 14(a)]

y Sale involves transfer of ownership and possession.
y The law confers the right on the seller to sell goods, and it is an implied condition in every sale, and
the seller has right to sell.
y The buyer may reject the goods, if the title of seller turns out to be defective.
Implied Condition in a Sale by Description (Section 15)

y Where there is contract for sale of goods by description, there is an implied condition that goods
shall correspond with the description.
y Where there is contract for sale of goods by sample as well as description, it is not sufficient that
the bulk goods correspond with the sample if the goods do not correspond with the description.
In Moore and Co versus Lavender and Co, [(1982) 2 KB 519 (CA)], there was a contract for purchase of
3000 tins of canned fruits from Australia, to be packed in cases each containing 30 tins. The seller
tendered a substantial portion in cases containing 24 tins. The Court observed that the method of
packing was part of the description and, therefore, the purchasers were entitled to reject the whole
consignment.
Sale by Sample
The provision enshrined under Section 17(1) of the Act provides the mere fact that the seller providing
a sample for the buyer’s inspection is not enough, to be such a sale there must be either an express
provision in the contract to that effect.
Implied Condition for a Sale by Sample [Section 17(2)]

Section 17(2) provides for the three implied conditions.
y The buyer shall correspond with the sample in quality
y The buyer shall have a reasonable opportunity of comparing bulk with sample

y The goods shall be free from any defect, rendering them un-merchantable which would not be
apparent on a reasonable examination of sample
It is important to take note that the right to inspect goods need not always be exercised before taking
the delivery of goods; where the goods are sealed parcels through rail, the buyer may exercise this right
to inspect the goods after taking the delivery. The buyer must examine the goods within a reasonable
time after taking the delivery, failing which he will be deemed to have accepted the goods.
Sale by Sample Sale by Description

In sale by sample, the sample of goods to be Sale by description is made about the thing and
sold or purchased is shown to the buyer who only on the basis of that transaction taken place.
after examining the goods agrees to buy them in
gross.
No reliance is given to the words of the seller. Reliance is given to the description made by the
seller.
In case of sale by sample, the goods supplied In case of sample by description, the goods
should correspond to the sample. supplied should correspond to the description.
Implied Condition as to Quality or Fitness [Section 16(1)]

The ordinary rule with respect to the quality or fitness of goods is that caveat emptor, i.e., let the buyer
beware, i.e., it is the buyer who should check the quality of goods. However, in the following situations
the responsibility as to the fitness of goods falls upon the seller, where:
y the buyer, expressly or by implication, makes known to the seller the particular purpose for which
the goods are required and as to show that the buyer relies on the seller’s skill or judgement;
y the goods are of description which it is in the course of the seller’s business to supply and therefore,
there is an implied condition that the goods shall be reasonably fit for such purpose.
Implied Condition of Merchantable Quality [Section 16(2)]

Merchantable quality means and includes the following.
y Marketability
y Reasonable fitness for general purpose
The provision enshrined under Section 16(2) of the Act applies to second hand goods as well.
The implied condition of merchantability will be excluded when the buyer has examined the goods,
and the defect in goods was a patent one, i.e., can be found on examination by a person of ordinary
prudence with the exercise of due care and attention. In case of latent defects, the buyer is still
protected in spite of the fact that he has examined goods.
In Morelli versus Fitch and Gibbons, [1928 2 KB 636], a public house sale bottle of ‘stone’s ginger wine’, it
is a sale of goods by description. If the bottle breaks while opening due to the defect in the bottle, and
the buyer is injured, he would be entitled to damages as the goods were not of merchantable quality.
Implied Condition by Trade Usage [Section 16(3)]

The provision under Section 16(3) gives statutory force to conditions implied by the usage of a particular
trade. It has been observed in commercial transactions, extrinsic evidence of custom and usage is
admissible to annex incidents to written contracts in matters with respect to which they are silent.

Implied Warranties
Implied warranties are those which the law presumes to have been incorporated in the contract of sale
in spite of the fact that the parties have not expressly included them in the contract of sale.
Implied Warranty as to Quiet Possession [Section 14(b)]

The provision embodied under Section 14(b) of the Act provides for an implied warranty that the buyer
shall have and enjoy quiet possession of goods. If the buyer’s possession is disturbed by anyone having
superior title than that of the seller, the buyer is entitled to hold the seller liable for breach of warranty.
Implied Warranty as to Freedom from Encumbrances [Section 14(c)]

This Section states that in a contract for sale, there is an implied warranty that the goods shall be so
free from any charge or encumbrances in favour of any third party not declared or known to the buyer
before or at the time when the contract is made.
Rule of Caveat Emptor

The rule of caveat emptor, i.e., let the buyer beware, is enunciated in Section 16 of the Act.
It lays down that it is the duty of the buyer to satisfy himself before purchasing the goods, that the
article which he buys is the one which he wants.
Effects of Contract: Passing of Properties

Passing of property constitutes the most important element in the law relating to contract for the sale
of goods. When it is said that the property in goods has passed to the buyer it means that the goods
have ceased to be the property of the seller and have become property of buyer, i.e., the buyer has
become the owner of the property.
Legal significances of passing of property in goods:
y if the property in goods is transferred from buyer to seller,
y buyer gets the proprietary rights over the goods, and
y seller can sue buyer for price only after the property in goods has been transferred to buyer.
Section 18, Sale of Goods Act, 1930, states that “when there is contract of sale of unascertained goods,
no property in goods is transferred to buyer unless and until the goods are ascertained”.
Property Passes When Intended to Pass

Section 19 of the Act provides that “when there is a contract for the sale of specific or ascertained
goods, the properties in them are transferred to the buyer at such time as the parties intend it to
be transferred”. For the purpose of ascertaining the intention of parties, regard shall be had to the
following.
y Terms of contract
y Conduct of parties
y Circumstances of cases
1. Passing of Property in Specific Goods

When the property is passed at the time of contract (Section 20)
The act provides that when there is an unconditional contract for sale of specific goods in a deliverable
state, the property in goods passes to the buyer when the contract is made.

In Agricultural Market Committee versus Shalimar Chemical Works, [AIR 1997 SC 502], the Supreme
Court observed that for the applicability of Section 20 of the act, the following conditions must be
satisfied.
a. There must be a sale of specific goods
b. The goods must be in a deliverable state
c. The contract must be unconditional
2. When Passing of Property Is Delayed to a Point of Time beyond the Date of Contract
a. Specific goods not in deliverable state but put into deliverable state (Section 21): the provision
provides that when there is an unconditional contract for the sale of specific goods not in a
deliverable state, the property therein does not pass at the time of contract. The seller in such a
case must do which is mandatory as well as necessary to put the goods in a deliverable state and
give notice thereof to the buyer before the property can pass to the buyer.
b. When the seller has to do something to the specific goods to ascertain price (Section 22): the
provision prescribes that where there is a contract for sale of specific goods in deliverable state,
but the seller is bound to weigh, measure, test, or do some other act within reference to the goods
for the purpose of ascertaining the price, the property does not pass until such act is done and the
buyer has notice thereof.
3. Passing or Transfer of Property in Case of Unascertained Goods

a. Goods must be ascertained (Section 18): the Act provides that where there is a contract for sale of
unascertained goods, no property in the goods passes to the buyer unless and until the goods are
ascertained.
Q. Differentiate between ascertainment and apportionment.
Ascertainment Apportionment
It is a unilateral act, i.e., either party may set It involves the element of common intention.
apart the goods.
The agreement to sell becomes a sale when Until appropriation, there is merely an
goods on which the contract is to operate are agreement to sell.
ascertained.
b. Sale of unascertained goods after appropriation [Section 21(1)]: the provision lays down the following
conditions which must be satisfied for the valid transfer of property in respect of unascertained
goods sold by the description passes to buyer.
1. There is an appropriation of goods to the contract either by the seller or buyer
2. The appropriation is made by one party with the assent of the other
3. The goods appropriated to the contract are of the same description as given in the contract
4. The goods are in deliverable state
5. The appropriation is unconditional
Reservation of Right of Disposal (Section 25)

The provision speaks about the right of disposal of goods reserves in favour of the seller. It states
that where the seller reserves the right of disposal of goods, until certain conditions are fulfiled, the
property does not pass.

In Income Tax Commissioner versus PM Rathod and Co, [AIR 1959 SC 1935], it was held that the object
of reserving the right of disposal of goods is generally to secure that the price shall be paid before the
property passes to the buyer. One mode of reserving the right of disposal of goods is to send the goods
by VPP. Property in the goods does not pass until payment is made by the buyer.
4. Passing or Transfer of Property in Case of Goods Sent on Approval or ‘on Sale or Return’
Term
Section 24 lays down the provision relating to the transfer of property in case of goods sent on
approval or ‘on sale or return’ term. When the goods are delivered to buyer on approval or ‘on sale or
return’ term, the property there in passes to the buyer:
a. when he signifies his approval or acceptance to the seller or does any other act adopting the
transaction, or
b. if he does not signify his approval or acceptance to the seller, but retains the goods without giving
notice of the rejection, then:
i. if a time has been fixed for the return of goods, on the expiry of such term, or
ii. if no time has been fixed for the return of goods, on the expiry of a reasonable time.
In Genn versus Winkel, [1912 107 LT 434], ‘A’ delivers some diamonds to ‘B’ on sale or return, and ‘B’
delivers them to ‘C’ on like terms. ‘C’ delivers them to ‘D’ and while they are in ‘D’s’ custody, they are
lost. As ‘B’ cannot return them to ‘A’, he has by dealing with them as above, adopted the transaction
and is liable to ‘A’ for the price.
Risk Prima Facie Passes with the Property (Section 26)

The provision lays down the general principle that “risk prima facie passes with the property”, which
means as to who is to bear the loss after the passing of property.
The exceptions to Section 26 are as follows.
y Express Agreement
It is important to take note that Section 26 of the Act begins with “Unless otherwise agreed”. The
parties may intend that though the property has not passed and the seller is still the owner of goods
but the loss or damage to goods, if any, will have to be borne by the buyer or vice versa.
y Trade Customs
Sometimes, ‘risk’ and ‘property’ may be separated by a trade custom. In Bevington versus Dale,
[(1902) 7 Comp Cas 112], certain fur were delivered to the buyer ‘on approval’. By a custom of the fur
trade, the goods were at the risk of the person ordering them on approval. They were stolen before
the time of approval expired. It was held that the loss has to be borne by the buyer although the
property had not yet passed to him.
y Delay in Delivery of Goods
The rule says that where the delivery has been delayed due to the fault of either the buyer or seller,
and there has occurred some loss to the goods due to such delay, then in such case the party at
fault has to bear loss.
y Seller or Buyer as Bailee of the Goods
The proviso to Section 26 states that the seller or buyer may not be owner of the goods but if he is
in the possession of goods, he may be responsible in his capacity as the bailee of goods.

Transfer of Title
The law relating to the transfer of title is based on the famous ancient maxim nemo dat quod non
habet—no seller can give to the buyer a better title than he himself has. It can be concluded that a
person who has in possession stolen goods or where a person obtains some goods by fraud, he cannot
pass a good title to the buyer. Section 27 of the Act has enunciated with a view to protect the interest
of true owner. It says that where goods are sold by a person who is not the owner thereof, and who
does not sell them under the authority or with the consent of the owner, the buyer acquires no better
title to goods than what the seller had. Hence, it can be concluded that if the seller’s title is defective,
the buyer’s title will also be so. Thus, the buyer cannot acquire a superior title to that of the seller.
Exceptions to Section 27, Sale of Goods Act, 1930

As a general rule, Section 27 of the Act tries to protect the interest of the owner, however, various
exceptions to this rule protect the rights of the buyer.
Exception I: Sale with the consent or authority of the owner
Even if a person is himself not the owner of goods, he can sell such goods if so authorised by the
owner, or if the owner consents to such sale. In such case, the sale is valid because it is with the
owner’s full consent or authority.
Exception II: Sale under the implied authority of the owner
Where the owner, by his words or conduct, causes the buyer to believe that the seller was the owner of
goods or had the owner’s authority to sell them and induced him to buy them in that belief, he cannot
afterwards deny the seller’s title or authority to sell.
For instance, ‘X’ is the owner of certain goods but he behaves in such manner as to lead ‘A’ believes
that ‘Y’ is the owner of those goods or that ‘Y’ has ‘X’s’ authority to sell them. Consequently, ‘A’ buys
the goods from ‘Y’. Here, ‘X’ is precluded by his conduct from disputing ‘A’s’ title to the goods.
Exception III: Sale by mercantile agent
‘Mercantile agent’ as defined under Section 2(9) of the Act is one, who has, in the customary course
of his business, as such agent, authority to sell goods, or to consign goods for the purpose of sale, or
to buy goods, or to raise money on the security of goods. For the application of such exception, the
following conditions are to be satisfied.
y The seller is a mercantile agent as defined under Section 2(9) of the Sale of Goods Act, 1930.
y The said mercantile agent got the possession of goods or documents of title to the goods with the
consent of the owner, and in his capacity as a mercantile agent.
y While selling the goods, he must have been acting in the ordinary course of his business of a
mercantile agent.
y The buyer must have acted in good faith without having any notice that such a mercantile agent did
not have any authority to sell.
Exception IV: Sale by one of the joint owners
Section 28 of the Sale of Goods Act, 1930, lays down the provision enabling a co-owner to sell not only
his own share but also of his other co-owner(s). The following conditions to be fulfiled for a validating
sale by a co-owner.
y One of the joint owners must have the possession of the goods.
y Such possession must be with the permission of the other co-owner(s).
y The buyer must have acted in good faith.

y At the time of contract of sale, the buyer must have no notice that the co-owner(s) had no authority
to sell.
For instance, ‘A’ and ‘B’ are joint owners of certain goods and ‘B’ allows ‘A’ to be in exclusive possession
of goods, ‘A’ can make a valid sale of them to anyone who buys such goods in good faith.
Exception V: Sale by a person in possession under a voidable contract
Section 29 of the Act deals with circumstances where a person sells goods and has obtained the
possession of goods under a contract voidable under Section 19 or 19A of the Act. This Section lays
down that a sale by a person who has obtained goods under a contract voidable at the option of
other party on the ground of coercion, fraud, misrepresentation, or undue influence, provided that the
contract has not been rescinded by the other party at the time of the sale.
For instance, ‘X’, by misrepresentation, induces ‘Y’ to sell and deliver him a car, ‘X’ sells the car to
‘Z’ before ‘Y’ has rescinded the contract. The property in car is transferred to ‘Z’. In such a case, ‘Y’
is entitled to compensation from ‘X’ for any loss which ‘Y’ has sustained by being prevented from
rescinding the contract.
Exception VI: Seller in possession after sale [Section 30 (1)]
The following are the requisite conditions for the application of the Section.
y The seller must continue in possession of goods or of the document’s title.
y Goods must have delivered to the subsequent buyer or the document of title must have been
transferred to him.
y The subsequent buyer must act in good faith and must not have notice of the previous sale.
y The subsequent buyer will get the good title of the goods.
For instance, ‘A’ sells goods to ‘B’, ‘B’ for his own convenience leaves the goods with ‘A’. ‘A’, acting in
bad faith, fraudulently sells the goods to ‘C’, who buys them in good faith without notice of the sale to
‘B’. ‘C’ gets a good title to the goods. The delivery of the goods by ‘A’ to ‘C’ has the same effect as if ‘A’
was expressly authorised by ‘B’ to deliver the goods.
Therefore, it is important to take note that a seller in possession of goods sold may make valid pledge
thereof, provided the pledgee act in good faith and has no notice of the previous sale.
Exception VII: Buyer in possession before property has vested in him [Section 30(2)]
The buyer must be having the possession of goods or documents with the consent of the seller.
Whereas, the Supreme Court in Central National Bank Ltd versus United Industrial Bank Ltd, [AIR 1954
SC 187], explains the term ‘consent’ as ‘agreeing on the same thing in the same sense’ and does not
mean ‘free consent’.
The goods must have been delivered to the buyer or the documents of the title transferred to him.
There must be good faith and absence of notice of seller’s right to property on the part of second
buyer.
Exception VIII: Sale by an unpaid seller [Section 54(3)]
Section 54(3) of the Act provides that where an unpaid seller who has exercised his rights of lien or
stoppage in transit resells the goods, the buyer acquires a good title there to as against the original
buyer, notwithstanding the no notice of resale has been given to the original buyer.
Exception IX: Seller by pawnee in case where the pawner makes default in payment [Section 176, Indian
Act, 1872]

If the pawner makes default in payment at the stipulated time of the promise, in respect of which the
goods were pledged, the pawnee may bring a suit against the pawner for the realisation of debt or he
may sell things pledged on giving the pawner in the reasonable notice of sale.
Performance of Contract
In common parlance, ‘performance of contract’ may be termed as the performance of respective
duties of the seller and the buyer as per the terms of the contract. As the parties to contract are bound
to perform their obligation under the contract, they are free to provide in their contract as to how the
performance of contract by each party to be made, for instance, delivery by instalments, payment of
price, etc.
Rules as to Delivery
Section 31 to Section 44 of the Act deals the rules relating to delivery of goods. The term ‘delivery’
has been defined in Section 2(2) of the Act. It means the voluntary transfer of possession from one
person to another. According to Section 31 of the Act, delivery denotes that “it is the duty of the seller
to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the
contract of sale”.
Section 32 of the Act reads as “unless otherwise agreed, delivery of goods and payment of price are
concurrent conditions, that is to say, the seller shall be ready and willing to give possession of goods
to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in
exchange for the possession of goods”.
In Vishnu Sugar Mills Ltd versus FCI, [AIR 1987 Pat 22], it was held that where there is compulsory sale
of a commodity under a statute, and there is no agreement regarding the time of delivery or payment,
there should be concurrent tender of price against the delivery, and hence a different procedure
adopted by the FCI was bad in law.
Key Features of Section 32

y Concurrent ConditionsIt means that the conditions imposed upon both the seller and the buyer have
to be performed simultaneously, i.e., the seller must be ready and willing to give delivery in exchange
for the price, and the buyer must be ready and willing to pay the price in exchange for the possession
of goods.
y Ready and Willing
⚪ The seller in order to be ready and willing need not be in actual possession of goods, it is sufficient
if he has such control of goods that he can cause them to be delivered.
⚪ Even the buyer must have proper arrangements for securing payment.
Delivery and Effect of Part Deliveries

Section 33 of the Act may be read into two parts.
y Delivery of goods sold may be made by doing anything which the parties agree shall be treated as
delivery.
y Delivery of goods which has the effect of putting the goods in possession of the buyer or of any
person authorised to hold them on his behalf.

Delivery of Goods
Actual Delivery Constructive Delivery Symbolic Delivery
Actual delivery: In actual delivery, goods themselves Section 36(3) of the Act also explains the
handed over by the seller to the buyer. concept of constructive delivery and it
Symbolic delivery: There is transfer of some symbol reads as “where the goods at the time of
representing the goods, so the buyer is able to have contract of sale are in possession of a third
control over the goods. person, there is no delivery by the seller
to the buyer unless and until such third
Constructive delivery: It is also known as fictitious
person acknowledged to the buyer that he
delivery. There is only doing of something which the
holds the goods on his behalf”.
parties treat as delivery of goods, although there is no
change in actual or visible custody.
It is important to take note that the consent of the buyer, seller, and third person having custody of
goods is essential. The mere giving of delivery of goods does not amount to delivery of goods.
Effect of Part Delivery

Section 34 of the Act provides for the delivery of a part of goods amounts to a delivery of the whole
for the purpose of passing the property provided that a part of goods is delivered in progress of the
delivery of the whole. It further provides that where a part of goods is delivered with the intention of
severing it from the whole that does not amount to delivery of the whole of goods.
In Mitchell Reid and Co versus Buldeo Das, [ILR (1887) 15 Cal 1], there was a sale of four bales of goods,
to be paid for on delivery, the buyer received one and paid for it, and refused to receive the others
owing to bad quality, it was held that the delivery of one bale did not amount to delivery of all the four
bales and, therefore, the seller’s remedy was for breach of contract and not for the price.
Buyer’s Duty to Apply for Delivery

Section 35 of the Act provides that the seller of goods is not bound to deliver them until the buyer
applies for delivery. The provision has been enshrined with a view to safeguard the interest of seller.
It is to be noted that the buyer has no cause of action against the seller if the buyer has not applied
for delivery. The application for delivery must be according to the provision of Section 32, i.e., unless
otherwise agreed upon, the buyer must be ready and willing to pay the price in exchange for possession
of goods.
Rules as to Delivery
Section 36 of the Act lays down the rules or conditions pertaining to the delivery of goods. They are
as follows.
1. Place and mode of delivery: the first part of the rule deals with the mode of delivery and the
second one deals with the place of delivery. It is important to take note that the Section lays down
a specific rule as to the place of delivery and mentions nothing with regards to that of the mode
of delivery. The mode of delivery of goods depends upon the contract between the parties and in
absence of such contract, the mode of delivery may be governed by the usage of the trade.

2. Time for delivery: the second rule states that when the seller is bound to send the goods to the
buyer, he must send them within a reasonable time and where the time is fixed, the seller is bound
to deliver the goods in time.
3. Delivery by attorney/bailee: when the goods are in the possession of a third person, there is no
delivery unless he assents to attorn to the buyer and becomes a bailee instead of that the seller.
4. Expenses of delivery: the expenses incidental to putting the goods in a deliverable state shall be
borne by the seller.
5. Time for tender of delivery: goods sold must be demanded at the reasonable hour and in the same
manner, the seller should tender them at reasonable hour.
Delivery of Wrong Quantity

Section 37 of the Act provides for three situations, where the seller delivers to the buyer.
1. Delivery of short or lesser quantity: the buyer may reject the goods when the seller delivers a
quantity of goods less than what was contracted for, but if he has accepted the goods, the buyer
does not preclude himself from claiming damages for short delivery.
2. Delivery of more or excess delivery: the buyer may reject the goods as a whole or may accept the
goods which he had contracted for and reject the goods in remaining. But if he, accepts all the
goods, then he must pay for them at the contract rate.
3. Delivery of mixed goods: the buyer may accept the goods which are in accordance with the contract
and the reject the rest or may reject the whole.
Instalment Deliveries
Section 38 of the Act contemplates that there must be a specific agreement for the delivery of goods
in instalments. Neither the seller nor the buyer can claim to make or demand delivery of less than the
full quantity and neither can insist that delivery should be made by instalments. The Section further
contemplates that there might be an agreement for delivery by instalments but the price may be
payable either on complete delivery or on delivery of each instalment. It is important to take note that
the rights of parties need to be determined with respect to the performance or breach of contract or
with regard to the payment of price or claim of damages or with regard to the rejection of instalments
of goods already delivered. In Motilal Srinivasa Sarda versus The Netha Co-operative Spinning Mills Ltd,
[AIR 1975 AP 169], there was a contract for the supply of 500 bales of cotton. The first instalment of
50 bales was supplied and accepted but the buyer rejected the second instalment of 50 bales as they
were adulterated with waste cotton mix, and repudiated the whole contract. It was held that the buyer
was justified in repudiating the whole contract.
Delivery to Buyer or Wharfinger

Section 39 of the Act codifies the law when the delivery of goods is made to carrier or a wharfinger and
it contemplates the following.
1. Delivery of goods by the seller to a carrier or wharfinger is prima facie deemed to be delivery to
the buyer.
2. When the goods are to be transmitted by sea route, the seller has, as a rule, to give notice to the
buyer to insure the same, and if he fails to do so, he has to take the risk of the same during such
sea transit.

3. The seller must also make such a contract with the carrier on behalf of the buyer, as is reasonable
in the circumstances. If he fails to do so, and the goods are lost or damaged in transit, the
buyer can take a stand against the carrier or alternatively, he may hold the seller responsible for
damages.
In Clarke versus Hutchins, [(1811) 14 East 475], it was settled that it is the seller’s duty to do whatever
is necessary to secure the responsibility of the carrier for the safe delivery of the goods, and to put
them into such a course of conveyance, so that in the case of loss the buyer might have his remedy
against the carrier.
Rules as to Acceptance of Delivery

Buyer’s right to examine the goods (Section 41):
this Section provides that when the goods have already been delivered to the buyer which he has not
previously examined, then it is not deemed to have accepted unless and until he has had reasonable
opportunity of examining them for the purpose of ascertaining whether they are in conformity with
the contract. It further states that if the seller gives notice to the buyer that container containing the
goods ordered by the buyer are at a particular place ready for delivery on payment of the price, but
does not allow the buyer to open such containers to enable him to inspect the goods, it is not a valid
tender of goods.
Acceptance (Section 42)

In Lohmann Rausher GMBH versus Medisphere Mkt Pvt Ltd, [117 (2005) DLT 95], it was succinctly
explained that if the buyer did not reject the goods within reasonable time, he would be deemed to
have accepted the goods. Long gap after which the goods were ostensibly rejected on promise that
they were defective or sub-standard is clearly fatal in context of statutory law, i.e., the law laid down
in Sections 41 and 42 of the Act.
The goods deemed to have accepted acceptance by the buyer are as follows.
1. When he intimates to the seller that he has accepted them.
2. When the goods have been delivered to him and he does not any act in relation to them which is
inconsistent with the ownership of the seller.
3. When, after the lapse of reasonable time, he retains the goods without intimating to the seller that
he has rejected them.
Buyer Not Bound to Return the Goods (Section 43)

Where the buyer rejects the goods as not being of the contract description, it is not his duty to send
them back to the seller, it is enough for him to give a clear notice that they are unaccepted or rejected
and then they are the seller’s risk. It is important to take note that he is not bound to put himself to
the expense or trouble of returning the goods.
Liability of Buyer for Neglecting or Refusing Delivery of Goods (Section 44)

The provision contemplates that where the property in goods has passed to the buyer and has become
the owner thereof, in such circumstances, if the buyer fails to take delivery, he is liable to the seller for:
1. any loss occasioned by his default,
2. a reasonable charge for the care and custody of the goods.
Similarly, if the seller delays the delivery of goods and the buyer, notwithstanding the delay, accepts
the goods, the seller is liable for any loss occasioned by the delay.

Rights of Unpaid Seller Against the Goods
Q. Who is the unpaid seller?
Ans. Section 45 of the Act defines unpaid seller and it states the following.
y The seller of goods is deemed to be an ‘unpaid seller’ within the meaning of this Act:
⚪ when the whole of the price has not been paid or tendered;
⚪ when a bill of exchange or other negotiable instrument has been received as conditional payment,
and the condition on which it was received has not been fulfiled by reason of the dishonour of
the instrument or otherwise.
y In this Chapter, the term ‘seller’ includes any person who is in the position of a seller, as, for instance,
an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has
himself paid, or is directly responsible for, the price.
Q. When can a seller be termed an unpaid seller?
Ans.
y The seller who is partly unpaid.
y If he has accepted the bill of exchange and the buyer either fails to honour at its maturity or becomes
insolvent.
y If the buyer has tendered the price, and the seller has refused to accept it, the seller cannot be said
to be an unpaid seller.
Rights of Unpaid Seller

Section 46 of the Act provides for the rights of an unpaid seller. Its reads as follows.
(1) Subject to the provisions of this Act and of any law for the time being in force, notwithstanding
that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such,
has by implication of law:
(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has
parted with the possession of them;
(c) a right of resale as limited by this Act.
(2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his
other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien
and stoppage in transit where the property has passed to the buyer.
Rights of Unpaid Seller
Rights against the goods Rights against the buyer
Rights Against the Goods

As per Section 2(f) of the Indian Contract Act, the seller must transfer the goods sold, and the
buyer must pay the required amount in return, under the contract of sale by them. This is known as
reciprocal promise. In other words, any set of promises made which forms the consideration or parts
of the consideration for each other are called reciprocal promises and every contract of sale of goods
consists of reciprocal promises. Three important rights of an unpaid seller against the goods are

y right of lien,
y right of stoppage of products in transit, and
y right of resale.
Rights of Lien (Section 47)

‘Lien’ is the right to keep possession of products and refuse to give purchaser until the fee is paid
by the purchaser. An unpaid seller, in possession of products, is entitled to work out his lien on the
products within the following instances.
1. In which the goods were sold without any requirement as to credit score.
2. Where the goods were sold on credit however the term of credit has expired.
3. In which the buyer will become insolvent even though the period of credit began to expire.
In the case of the purchaser’s insolvency, the lien exists even though goods were offered on credit
and the duration of credit has not expired till the time. When the products are offered on credit, the
presumption is that the customer shall preserve his credit suitable.
If before payment the buyer turns insolvent, the seller is entitled to exceed his rights and hold the
products as security for the charge.
The unpaid seller’s lien is a possessory lien, the lien may be exercised so long as the seller stays in
ownership of the products. He may exercise his rights of lien but he is holding the ownership of the
goods as agent for the customer [Section 47(2)].
Any property in the transfer of files, identify that the products which are not affecting these rights,
supplied goods should stay inside the real possession of the seller. In truth, when a belonging has
passed to the consumer then the most effective maintenance of products is technically known as ‘lien’.
In which the belonging goods have not exceeded the customer possession and the same remains with
the seller, then it will be very difficult to maintain that the seller has a lien towards his own goods. The
seller’s lien when an asset has not exceeded the purchaser is called a right of withholding shipping. For
that reason, Section 46(2) states in which the belonging goods have not handed over to the customer,
the unpaid seller has a right to withhold the transfer. The seller may additionally incur from storing the
products inside the exercise of his lien for the charge. This right of lien extends to the entire product
on his own despite the fact that the part price for the one’s items has already been made. In other
phrases, the consumer is not entitled to claim delivery of a part of the products. In addition, wherein
an unpaid seller has made component shipping of the goods, he may also exercise his rights of lien on
the rest, except such element shipping has been made under such instances as to reveal an agreement
to waive the lien (Section 48). Also, the lien can be exercised even though the seller has received a
‘decree’ for the rate of the products [Section 49(2)].
When Is Lien Lost?

Lien relies upon physical ownership of products. As soon as the possession is misplaced, the lien is
also misplaced. The unpaid dealer of goods loses his lien thereon inside the following instances.
1. When he provides the products to a carrier or other bailee for the motive of transmission to the
customer without reserving the rights of possession of the products.
2. When the buyer lawfully obtains ownership of the goods.
3. When the seller expressly or impliedly waives his rights of lien. An implied waiver takes place while
the seller offers a fresh time period of credit or allows the customer to just accept an invoice of
trade payable at a particular date to a sub-sale which the purchaser may additionally have made.

Accordingly, when a refrigerator after being bought, will be delivered to the purchaser and if it no longer
functions well, the buyer takes it again to the seller for repairs, here we can say that the seller could
not exercise his lien over the fridge.
Lien Pledge
Right to retain possession until seller’s claim is Right to retain goods as security for the debtor’s
satisfied debt
Unpaid seller exercises the right against the Pledgee keeps the goods of the debtor with the
buyer’s wishes debtor’s consent
Terminates if price paid Is redeemed if the debtor pays the debt
Does not authorise seller to resell Authorises pledgee to sell in case of default
Rights of Stoppage of Goods in Transit

The right of stoppage in transit method is the right of stopping the transit of the goods even if they may
be with a carrier for the cause of transmission to the buyer; resuming the ownership of the customer
and retaining possession until they made the payment of the good. Hence, this right is an extension
of the right of lien because it entitles the seller to regain ownership even if the seller has parted with
the possession of the products.
When Can This Right Be Exercised? (Section 50)

An unpaid seller can exercise this right in the simplest way in the following situations.
y The purchaser becomes insolvent: the buyer is said to be bankrupt when he has denied paying his
debts inside the normal route of business, or if he cannot pay his money then it will be due [Section
2(8)].
y The property has exceeded the buyer: if assets have not surpassed the buyer, then this right is called
the “right of withholding shipping” [Section 46(2)].
y The products are within the route of transit: this means that goods should be neither with the seller
nor with the buyer nor with their agent. The product has to be within the custody of a carrier as an
intermediary. At that time, the carrier needs not to be either a seller’s agent or customer’s agent.
Because, if he is the seller’s agent, then the products are still in the arms of the seller in the eye
of regulation, and, consequently, there may be no transit, and if he is the customer’s agent, the
customer gets transport in the attention of law and hence query of stoppage does now not rise up.
Duration of Transit (Section 51)

Since the right of stoppage in transit can be exercised simply as long as the goods are inside the route
of transit, it becomes important for the seller to recognize the transit route where it starts and where it
comes to the destination. When the transit involves a stop, the right of stoppage cannot be exercised.
Items are deemed to be in course of transit from the time when they are added to a service or other
bailee for the motive of transmission to the buyer till the purchaser or his agent takes transport of
them. Thus, the transit continues as long as the products are not delivered to the customer or his
agent, irrespective of whether or not they should be mandatory at the destination with the service
expecting transmission or are in real transit.
When the transit is deemed to be at near the destination, then the seller cannot exercise his right of
stoppage in the following instances.

y When the customer or his agent takes shipping after the products have reached the destination.
y When the buyer or his agent obtain delivery of the goods before their arrival at the appointed
destination.
y While the products have arrived at their destination and the seller acknowledges to the consumer or
his agent that he holds the products on his behalf.
y When the products have arrived at their destination then the customer in preference to shipping
requests the seller to hold the products to some further destination then the seller agrees to take
them to the new destination.
y When the service wrongfully refuses to supply the goods to the consumer’s agent.
y When some part of shipping of the goods has been made to the customer with the intention of
handing over the whole of the products, transit can be at a quit for the rest of the products.
How Is the Right of Stoppage Exercised? (Section 52)

An unpaid seller may additionally exercise his right of stoppage in transit both:
y through taking real possession of the goods, and
y by means of giving a declaration to the seller in whose possession the products are.
Such words can be given to the person in real ownership of the goods. Within the latter case, the word
must accept well in advance to permit the superior to talk together with his agent or servant in time,
for transport to the customer. If with the addition of a mistake he offers the products to the purchaser,
he may be responsible for the conversion. The fees of re-delivery are to be tolerated by the seller.
Lien Stoppage in Transit
It is the right to retain possession of goods. It is the right to regain or resume the possession
of goods.
Seller’s possession of goods is sine qua non. The essentials are:
a. seller parting with possession,
b. possession with carrier, and
c. buyer having not acquired possession.
It is exercisable as long as the seller is in It is exercisable as long as the goods are
possession of goods. passing through channels of communication for
the purpose of reaching the hands of vendee.
When the right of lien ends, the right to stop in The right of stoppage in transit begins when the
transit begins. right of lien ends.
The right of lien is exercised when the buyer is The right of stoppage in transit can be exercised
in default, whether he be solvent or not. only when the buyer is insolvent.
Right of Resale
The right of resale is a completely valuable right given to an unpaid seller. Within the absence of this
right, the unpaid seller’s other rights in opposition to the goods, specifically, ‘lien’ and ‘stoppage in
transit’ could no longer have been used due to the fact that the right only entitles the unpaid dealer
to keep the products until paid with the aid of the buyer. Section 54, therefore, offers to the unpaid
supplier a confined right to resell the goods inside the following lines.
y In which the goods are of a perishable nature
y In which this type of right is expressly reserved inside the settlement in case the buyer needs to
make default

y In which the seller has given a promise to the buyer of his purpose to resell and the customer does
not pay the price within an affordable time
If on a resale there is a loss to the seller, he can get better from the defaulting customer. However, if
there is a surplus at the resale, the seller can preserve it with him because the customer cannot be
allowed to take advantage of his personal identity. But, no word of resale is given to the customer, the
right of the seller to assert loss and maintain a surplus, if any, is reversed. In different words, if the
unpaid seller fails to present the observation of resale to the buyer, he cannot recover the loss from
the customer.
Section 54(3) particularly announces “Where an unpaid seller has exercised his right of lien or stoppage
in transit in transit resells the products, the customer acquires a terrific identify thereto as in opposition
to the unique purchaser, however, that no note of the resale has been given to the original customer”.
Rights of Unpaid Seller against Buyer

When the buyer of goods does not pay his dues to the seller, the seller becomes an unpaid seller. And
now the seller has certain rights against the buyer. Such rights are the seller remedies against the
breach of contract by the buyer. Such rights of the unpaid seller are additional to the rights against
the goods he sold.
y Suit for Price
Under the contract of sale if the property of the goods is already passed but he refuses to pay for
the goods the seller becomes an unpaid seller. In such a case, the seller can sue the buyer for
wrongfully refusing to pay him his due. But say the sales contract says that the price will be paid at
a later date irrespective of the delivery of goods and on such a day the if the buyer refuses to pay,
the unpaid seller may sue for the price of these goods. The actual delivery of the goods is not of
importance according to the law.
y Suit for Damages for Non-acceptance
If the buyer wrongfully refuses or neglects to accept and pay the unpaid seller, the seller can sue
the buyer for damages caused due to his non-acceptance of goods. Since the buyer refused to
buy the goods without any just cause, the seller may face certain damages. The measure of such
damages is decided by the Section 73 of the Indian Contract Act, 1872, which deals with damages
and penalties. For example, in the case of seller A, he agrees to sell to B 100 L of milk for a decided
price. On the day, B refuses to accept the goods for no justifiable reason. A is not able to find
another buyer and the milk goes bad. In such a case, A can sue B for damages.
y Repudiation of Contract before Due Date
If the buyer repudiates the contract before the delivery date of the goods the seller can still sue
for damages. Such a contract is considered as a rescinded contract, and so the seller can sue for
breach of contract. This is covered in the Indian Contract Act and is known as Anticipatory Breach
of Contract.
y Suit for Interest
If there is a specific agreement between the parties the seller can sue for the interest amount due
to him from the buyer. This is when both parties have specifically agreed on the interest rate to be
paid to the seller from the date on which the payment becomes due. But if the parties do not have
such specific terms, still the court may award the seller with the interest amount due to him at a
rate which it sees fit.

Rights of the Buyer against the Seller
Just as the seller can rescind the contract, similarly the buyer has right to rescind. When the seller
breaches the contract, the buyer also has certain remedies against the seller. Let us take a look at
some remedies that the Sales Act prescribes for the buyer.
Damages of Non-delivery
If the seller wrongfully or neglectfully refuses to deliver the goods to the buyer, then the buyer can
sue for the non-delivery of goods. According to Section 57 of the Sale of Goods Act, if the buyer faces
losses due to the wrongful actions of the seller (non-delivery), the buyer can sue for damages caused
due to this. For example, A agrees to sell to B 10 pairs of shoes for 1000/- each. B was going to sell the
same shoes to C for 1100/- per pair. A neglects to deliver the goods to B. Now, B can sue A for non-
delivery. B can also sue for the amount of 100/- per pair, i.e., 1000/- (the difference between B’s cost
price and sale price).
Suit for Specific Performance

If the seller commits a breach of contract, the buyer can approach the court to ask the seller for
specific performance. The Court after deliberation can command the seller for specific performance.
One important point to keep in mind is that this remedy is only available if the goods are ascertained
or specific. For example, there was a contract between A and B that A will sell to B, a very expensive
painting on a specific date. On the said day A refuses to sell. B can approach the Court, and the Court
can ask A to sell the painting to B at the ascertained price.
Suit for Breach of Warranty

When the seller breaches the warranty of the goods, the buyer cannot simply reject the goods on such
basis. The buyer has two options in such a case,
y set up against the buyer the said breach of warranty in the extinction of the price
y or sue the seller for breach of warranty.
Repudiation of Contract
If the seller repudiates the contract, the buyer does not have to wait until the date of contract. He can
treat the contract as rescinded and sue for damages immediately. This will be an anticipatory breach
of contract.
Sue for Interest

The Act specifically states that nothing in the Act will affect the right of the seller or the buyer to
recover interest or special damages due to him by the contract. And if there is no specific clause in the
contract, the Court can come to the rescue of the affected party.
Landmark Judgements
Unilateral Offer for Sale of Goods by Advertisement

Carlill versus Carbolic Smoke Ball Co
(1892) 2 QB 484
Bench: Lindley and Bowen
Facts: Carbolic Smoke Balls manufactured and sold by Carbolic Smoke Ball Co. Reward of 100 pounds
was offered by company by placing advertisements in newspapers to any person using smoke balls

three times a day as directed and still contacted influenza, cold, or any other disease. Carlill purchased
ball and used it after seeing advertisement and contacted influenza and claimed for reward. Carbolic
Smoke Ball Co refused to pay. Carlill sued the Carbolik Smoke Ball Co for damages for breach of
contract.
Issue: Party making unilateral offer for sale of goods by means of advertisement whether waives
notification of acceptance, if his purpose is to sell as much product as possible?
Held: Unilateral offer by means of advertisement for sale of goods by a person impliedly waives
notification of acceptance if purpose is to sell as much product as possible. The Court further held
that the person who makes the offer may decline to require notice of acceptance. A person need only
follow indicated method of acceptance to accept an offer. The Court also held that advertisement
when specifies quantity of persons who are eligible to accept its terms, is considered to be an offer.
Offeree is not required to give notice of his performance if such advertisement requires performance.
The Court pointed to Carbolic Smoke Ball’s claim in advertisement that it deposited 1000 pounds with
Alliance Bank and intended to demonstrate the company’s sincerity in paying reward.
—————
Doctrine of Estoppel
Union of India versus M/s Indo–Afghan Agencies
AIR 1968 SC 718: 1968 (2) SCR 366: 1968 (2) SCA 31: 1968 (2) SCJ 889
Decided on: 22-11-1967
Bench: JC Shah, SM Sikri, and JM Shelat
Facts: Scheme called Export Promotion Scheme was published by Textile Commissioner providing
incentives to exporters. The scheme was extended to woollen goods exported to Afghanistan. M/s
Indo–Afghan agencies a firm dealing in woollen goods exported to Afghanistan woollen goods to the
extent of about five crore. As per the scheme, the company is entitled to a certificate to import wool
tops, raw wool, wool waste and racks to the extent of about five crore. But the Textile Commissioner
granted certificate only to an extent of about three crore only. Dispute raised by company contending
that the Government is estoppel from reducing the entitlement which was due to it.
Issue: Whether the Government is bound by the doctrine of estoppel?
Held: The Government is not exempt from liability to carry out its representation made by it as to its
future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency
fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the
citizen on an ex parte appraisement of the circumstances in which the obligation has arisen. The Court
directed the Textile Commissioner to issue to the company import certificates to the total entitlement
equal to 100% FOB value of the goods exported by it.
—————
Words and Phrases: Legally Defined
‘Any’ and ‘Potential’

“The main clause itself is very wide. It applies to any service made available to potential users. The
words ‘any’ and ‘potential’ are significant. Both are of wide amplitude. The word ‘any’ dictionary means
‘one or some or all’. In Black’s Law Dictionary it is explained thus ‘word “any” has a diversity of meaning
and may be employed to indicate “all” or “every” as well as “some” or “one” and its meaning in a given

statute depends upon the context and the subject matter of the statute’. The use of the word ‘an’ in
the context it has been used in clause (o) indicates that it has been used in wider sense extending from
one to all. The other word ‘potential’ is again very wide. In Oxford Dictionary it is defined as ‘capable of
coming into being, possibility’. In Black’s Law Dictionary it is defined as ‘existing in possibility but not
in act. Naturally and probably expected to come existence at some future time, though not existing;
for example, the future product of gain or trees already planted, or the successive future instalments
or payments on a contract or engagement already made’. In other words, service which is not only
extended to actual users but those who are capable of using it are covered in the definition. The
clause is thus very wide and extends to and or ail actual or potential users”; Regional Provident Fund
Commissioner versus Shiv Kumar Joshi, [2000 SCC 98].
Consumer
‘Consumer’, as the term implies, is one who consumes. As per the definition, consumer is the one
who purchases goods for private use or consumption. The meaning of the word ‘consumer’ is broadly
stated in the above definition so as to include anyone who consumes goods or services at the end of
the chain of production. The comprehensive definition aims at covering every man who pays money
as the price or cost of goods and services. The consumer deserves to get what he pays for in real
quantity and true quality. In every society, consumer remains the centre of gravity of all business and
industrial activity. He needs protection from the manufacturer, producer, supplier, wholesaler, and
retailer; Morgan Stanley Mutual Fund versus Kartick Das, [1994 (4) SCC 225: JT 1994 (3) SC 654].
Property
In Black’s Law Dictionary (6th Edition, 1990), the expression ‘property’ has been given the meaning,
“property peculiar or proper to any person; that which belongs exclusively to one”. The Dictionary of
Commercial Law by AH Hudson (published by Butterworths; 1983) says that ‘property’ in commercial
law may carry its ordinary meaning of the subject matter of ownership, e.g., in bankruptcy referring
to the property of the debtor divisible amongst creditors. But elsewhere as in sale of goods it may be
used as a synonym for ownership and lesser rights in, goods. Section 2(1) of the Sale of Goods Act,
1979 makes transfer of property central to sale. Section 61(1) provides that ‘property’ means the general
property in goods, and not merely a special property; ‘general property’ is tantamount to ownership
bailees who have possession and not ownership and others with limited interests are said to have a
‘special property’ as their interest.
Jowitt’s Dictionary of English Law (Sweet and Maxwell Limited, 1977) Volume I also sets out the
meaning of the expression ‘property’ as well as the meaning of the expressions ‘general property’ and
‘special property’.
In its largest sense, ‘property’ signifies things and rights considered as having a money value, especially
with reference to transfer or succession, and to their capacity of being injured. Property includes not
only ownership estates and interest in corporeal things, but also rights such as trademarks, copyrights,
patents, and rights in personam capable of transfer or transmission such as debts.
Property is of two kinds, real property (q.versus) and personal property, in reality is acquired by entry;
conveyance, or devise; and in personality, by many ways, but most usually by gift, bequest, or sale.
Under the Law of Property Act, 1925, Section 205, ‘property’ includes anything in action and any interest
in real or personal property. There must be a definite interest; a mere expectancy as distinguished
from a conditional interest is not a subject of property; Vikas Sales Corporation versus Commissioner
of Commercial Taxes, [1996 (2) Supp SCR 204].

Sale of Goods
Interpretation of the expression ‘sale of goods’: there must be an agreement between the parties for
the sale of the very goods in which eventually property passes. In a building contract, the agreement
between the parties is that the contractor should construct a building according to the specifications
contained in the agreement, and in consideration therefor receive payment as provided therein, and as
will presently be shown there is in such an agreement neither a contract to sell the materials used in
the construction, nor does property pass therein as movables. It is therefore impossible to maintain
that there is implicit in a building contract a sale of materials as understood in law.
The expression ‘sale of goods’ was, at the time when the Government of India Act, 1935, was enacted,
a term of well-recognised legal import in the general law relating to sale of goods and in the legislative
practice relating to that topic and must be interpreted in Entry 48 in List II in Sch. VII of the Act
as having the same meaning as in the Sale of Goods Act, 1930; The State of Madras versus Gannon
Dunkerley and Co (Madras), [AIR 1958 SC 560: 1959 SCR 379].
Valuable Consideration
Cash or deferred payment in Clause (ff) of Section 2 of the Act satisfied the said definition. The
expression ‘valuable consideration’ has a wider connotation, but the said expression is also used in
the same collocation in the definition of ‘sale’ in Section 2(h) of the Act. The said expression must
bear the same meaning, in Clause (ff) and Clause (h) of Section 2 of the Act. It may also be noticed
that in most of the Sales Tax Acts the same three expressions are used. It has never been argued or
decided that the said expression means other than monetary consideration. This consistent legislative
practice cannot be ignored. The expression ‘valuable consideration’ takes colour from the preceding
expression ‘cash or deferred payment’. If so, it can only mean some other monetary payment in the
nature of cash or deferred payment. We, therefore, hold that Clause (ff) of Section 2 of the Act is not
void for legislative incompetence; Devi Das Gopal Krishnan versus State of Punjab, [AIR 1967 SC 1895:
1967 (3) SCR 557].
Objective Type Questions

1. The Sale of Goods Act, 1930, is based on (A) Stock and shares
which of the following. (B) Grass
(A) The English Bill of Exchange Act, 1882 (C) Money
(B) The Transfer of Property Act, 1882 (D) Growing crops
(C) The English Sale of Goods Act, 1893 Ans. (C)
(D) The Indian Contract Act, 1872 In Section 2(7) of the Sale of Goods Act, 1930,
Ans. (C) goods means every kind of moveable property
This Act of 1930 is mainly based on the English other than actionable claims and money and
Sale of Goods Act, 1893. includes stock and shares, growing crops, grass,
The English law of sale of goods was codiﬁed and things attached to or forming part of the
in 1893 by the enactment of the Sale of Goods land, which are agreed to be severed before sale
Act, which embodied the basic common law or under the contract of sale.
principles after adapting them to meet the needs 3. Mercantile agent means the person:
of a growing society. (A) who sells goods, or consigns for the
2. Under the Sale of Goods Act, 1930, movable purpose of sale, or buy goods or raises
goods does not include the following. money on security of goods.

(B) who only sells or purchases. the price is to be fixed by the valuation of a third
(C) who only consigns goods. party and such third party cannot or does not
(D) who only transfers goods. make such valuation, the agreement is thereby
Ans. (A) avoided, provided that if the goods or any part
In Section 2(9) of the Sale of Goods Act, 1930, thereof have been delivered to, and appropriated
mercantile agent means a mercantile agent by, the buyer, he shall pay a reasonable price
having in the customary course of business as therefor.
such agent authority either to sell goods, or to 7. In a sale of goods, condition is ______.
consign goods for the purposes of sale, or to buy (A) limit on the price
goods, or to raise money on the security of goods. (B) limit on the quantity
4. ‘Property’ under Section 2(11) of the Sale of (C) stipulation essential to the main purpose
Goods Act, 1930, means: of the contract
(A) the general property in goods. (D) None of the above
(B) merely a special property in goods. Ans. (C)
(C) mercantile element in goods. Section 12 of the Sale of Goods Act, 1930,
(D) quality element in goods. Condition and Warranty
Ans. (A) (1) A stipulation in a contract of sale with reference
In Section 2(11) of the Sale of Goods Act, 1930, to goods which are the subject thereof may be a
property means the general property in goods, condition or a warranty.
and not merely a special property. (2) A condition is a stipulation essential to the
5. A contract of sale of goods can be: main purpose of the contract, the breach of
(A) conditional. which gives rise to a right to treat the contract
(B) absolute. as repudiated.
(C) temporary. (3) A warranty is a stipulation collateral to the
(D) Either (A) or (B) main purpose of the contract, the breach of
Ans. (D) which gives rise to a claim for damages but not to
In Section 4(2) of the Sale of Goods Act, 1930, a right to reject the goods and treat the contract
Sale and agreement to sell—(2) A contract of sale as repudiated.
may be absolute or conditional. (4) Whether a stipulation in a contract of sale is
a condition or a warranty depends in each case
6. Where the price of the goods under a contract
on the construction of the contract. A stipulation
of sale is to be fixed by the valuation of a third
may be a condition, though called a warranty in
party who fails to fix the valuation, but goods
the contract.
are supplied to the buyer, under Section 10 of
the Sale of Goods Act, 1930, the buyer is: 8. Which of the following statements is NOT
correct?
(A) liable to pay the reasonable price of the
goods. (A) Conditions and warranties are
(B) liable to pay the minimum price of the stipulations in the contract of sale.
goods. (B) A stipulation as a warranty may not be
(C) not liable to pay any price until fixed by treated as condition.
the valuer. (C) Condition is a stipulation essential to
(D) liable to pay the maximum retail price. main purpose of contract.
Ans. (A) (D) Warranty is a stipulation collateral to
Section 10(1) of the Sale of Goods Act, 1930, main purpose of contract.
Agreement to sell at valuation—(1) Where there Ans. (B)
is an agreement to sell goods on the terms that

Section 12 of the Sale of Goods Act, 1930, goods of that description and in a deliverable
Condition and Warranty state are unconditionally appropriated to the
(1) A stipulation in a contract of sale with reference contract, either by the seller with the assent
to goods which are the subject thereof may be a of the buyer or by the buyer with the assent of
condition or a warranty. the seller, the property in the goods thereupon
(2) A condition is a stipulation essential to the passes to the buyer. Such assent may be express
main purpose of the contract, the breach of or implied, and may be given either before or after
which gives rise to a right to treat the contract the appropriation is made.
as repudiated. Delivery to carrier—(2) Where, in pursuance of the
(3) A warranty is a stipulation collateral to the contract, the seller delivers the goods to the buyer
main purpose of the contract, the breach of or to a carrier or other bailee (whether named by
which gives rise to a claim for damages but not to the buyer or not) for the purpose of transmission
a right to reject the goods and treat the contract to the buyer, and does not reserve the right of
as repudiated. disposal, he is deemed to have unconditionally
(4) Whether a stipulation in a contract of sale is appropriated the goods to the contract.
a condition or a warranty depends in each case 11. The rule in the Latin maxim nemo dat quod
on the construction of the contract. A stipulation non habet under the Sale of Goods Act is
may be a condition, though called a warranty in contained in:
the contract. (A) Section 27.
9. A seller sells undergarments which cause (B) Section 29.
skin disease to buyer. What is the liability of (C) Section 26.
the seller? (D) Section 28.
(A) He is liable for breach of warranty. Ans. (A)
(B) He is liable for breach of a condition. Nemo dat quod non habet is a Latin term which
(C) He is not liable. means that ‘no one can give what he does not
(D) The buyer should be careful. have’.Section 27 of the Sale of Goods Act, 1930,
Ans. (B) Sale by person not the owner: Subject to the
Section 12(2) of the Sale of Goods Act, 1930, provisions of this Act and of any other law for
Condition and warranty—(2) A condition is a the time being in force, where goods are sold by
stipulation essential to the main purpose of the a person who is not the owner thereof and who
contract, the breach of which gives rise to a right does not sell them under the authority or with
to treat the contract as repudiated. the consent of the owner, the buyer acquires
10. Under Section 23 of the Sales of Goods Act, no better title to the goods than the seller had,
1930, for passing of property in goods: unless the owner of the goods is by his conduct
(A) the buyer is to do something for precluded from denying the seller’s authority to
ascertaining the price. sell, provided that, where a mercantile agent is,
(B) the goods must be in a deliverable state. with the consent of the owner, in possession of
(C) the seller is to do something to put the the goods or of a document of title to the goods,
goods in a deliverable state. any sale made by him, when acting in the ordinary
(D) All of the above course of business of a mercantile agent, shall be
Ans. (B) as valid as if he were expressly authorised by the
Section 23 of the Sale of Goods Act, 1930, Sale owner of the goods to make the same; provided
of unascertained goods and appropriation— that the buyer acts in good faith and has not at
(1) Where there is a contract for the sale of the time of the contract of sale notice that the
unascertained or future goods by description and seller has not authority to sell.

12. Nemo dat quod non habet (no one can give a may have passed to the buyer, the unpaid seller
better title than that which he himself has) is of goods, as such, has by implication of law:
an established principle of: (1) a lien on the goods for the price while he is
(A) Rule of Transfer of Property. in possession of them;
(B) Rule of Law of Torts. (2) in case of the insolvency of the buyer a right
(C) Rule of Law of Crimes. of stopping the goods in transit after he has
(D) Rule of Contract. parted with the possession of them;
Ans. (A)
(3) a right of resale as limited by this Act.
Nemo dat quod non habet is a Latin term which
means that ‘no one can give a better title than 14. Goods are deemed to be in course of transit
that which he himself has’. from the time when they are delivered to
Section 27 of the Sale of Goods Act, 1930, Sale by a carrier or other bailee for the purpose of
person not the owner: Subject to the provisions transmission to the buyer:
of this Act and of any other law for the time being (A) until the buyer or his agent in that behalf
in force, where goods are sold by a person who takes delivery of them from such carrier
is not the owner thereof and who does not sell or other bailee.
them under the authority or with the consent of (B) until the buyer himself takes delivery of
the owner, the buyer acquires no better title to them from such carrier or other bailee.
the goods than the seller had, unless the owner (C) until the buyer or his agent personally
of the goods is by his conduct precluded from communicates to the carrier or bailee
denying the seller’s authority to sell, provided that the delivery is taken.
that, where a mercantile agent is, with the (D) None of the above
consent of the owner, in possession of the goods Ans. (A)
or of a document of title to the goods, any sale Section 51(1) of the Sale of Goods Act, 1930,
made by him, when acting in the ordinary course Duration of transit: Goods are deemed to be in
of business of a mercantile agent, shall be as course of transit from the time when they are
valid as if he were expressly authorised by the delivered to a carrier or other bailee for the
owner of the goods to make the same; provided purpose of transmission to the buyer, until the
that the buyer acts in good faith and has not at
buyer or his agent in that behalf takes delivery of
the time of the contract of sale notice that the
them from such carrier or other bailee.
seller has not authority to sell.
15. Under Section 51 of the Sale of Goods Act,
13. An unpaid seller can exercise:
1930, the goods are in transit so long as they
I. right of stoppage in transit.
are in:
II. right to lien.
(A) possession of the carrier qua buyer.
III. right to resale.
(B) possession of the carrier qua carrier.
Codes
(C) possession of the carrier appointed by
(A) Any of the above
the buyer qua the buyer.
(B) Only I
(D) None of the above
(C) Only I and II
Ans. (B)
(D) Only II and III
Section 51 of the Sale of Goods Act, 1930, Duration
Ans. (A)
of Transit
Section 46(1) of the Sale of Goods Act, 1930, Unpaid
(1) Goods are deemed to be in course of transit
seller’s sights—(1) Subject to the provisions of
from the time when they are delivered to a carrier
this Act and of any law for the time being in force,
or other bailee for the purpose of transmission
notwithstanding that the property in the goods
to the buyer, until the buyer or his agent in that

behalf takes delivery of them from such carrier or 17. In a sale of goods by auction, as soon as the
other bailee. hammer falls, the goods:
(2) If the buyer or his agent in that behalf obtains (A) become the property of the buyer only
delivery of the goods before their arrival at the on payment of price.
appointed destination, the transit is at an end. (B) become the property of buyer even if
(3) If, after the arrival of the goods at the there is a condition that the goods shall
appointed destination, the carrier or other bailee not be removed before payment.
acknowledges to the buyer or his agent that he (C) become the property of the buyer only if
holds the goods on his behalf and continues in there is no condition that the goods shall
possession of them as bailee for the buyer or his not be removed before payment.
agent, the transit is at an end and it is immaterial (D) do not become the property of the buyer
that a further destination for the goods may have however, the bidder is vested with the
been indicated by the buyer. right to deal with them as owner.
(4) If the goods are rejected by the buyer and the Ans. (B)
carrier or other bailee continues in possession of Section 64 of the Sale of Goods Act, 1930, Auction
them, the transit is not deemed to be at an end, sale—in the case of a sale by auction:
even if the seller has refused to receive them (1) where goods are put up for sale in lots, each
back. lot is prima facie deemed to be the subject
(5) When goods are delivered to a ship chartered of a separate contract of sale.
by the buyer, it is a question depending on the (2) The sale is complete when the auctioneer
circumstances of the particular case, whether announces its completion by the fall of the
they are in the possession of the master as a hammer or in other customary manner;
carrier or as agent of the buyer. and, until such announcement is made, any
(6) Where the carrier or other bailee wrongfully bidder may retract his bid.
refuses to deliver the goods to the buyer or his
(3) A right to bid may be reserved expressly by or
agent in that behalf, the transit is deemed to be
on behalf of the seller and, where such right
at an end.
is expressly so reserved, but not otherwise,
(7) Where part delivery of the goods has been
the seller or any one person on his behalf
made to the buyer or his agent in that behalf,
may, subject to the provisions hereinafter
the remainder of the goods may be stopped in
contained, bid at the auction.
transit, unless such part delivery has been given
(4) Where the sale is not notified to be subject
in such circumstances as to show an agreement
to a right to bid on behalf of the seller, it shall
to give up possession of the whole of the goods.
not be lawful for the seller to bid himself or
16. Under Section 63 of Sale of Goods Act, 1930,
to employ any person to bid at such sale, or
‘reasonable time’ is a ______.
for the auctioneer knowingly to take any bid
(A) question of law
from the seller or any such person; and any
(B) question of fact
sale contravening this rule may be treated as
(C) mixed question of law and fact
fraudulent by the buyer.
(D) Either (A) or (C)
(5) The sale may be notified to be subject to a
(E) None of the above
reserved or upset, price.
Ans. (B)
Section 63 of the Sale of Goods Act, 1930, (6) If the seller makes use of pretended bidding
Reasonable time a question of fact: Where in to raise the price, the sale is voidable at the
this Act any reference is made to a reasonable option of the buyer.
time, the question what is a reasonable time is a
question of fact.

18. In the case of ______ it was held that lottery Lottery tickets are good and not actionable
tickets are good and not actionable claims. claims. Lottery tickets were not actionable claims
Thus, sale of lottery tickets is sale of goods. but ‘good’ within the definition of that expression
(A) H Anraj versus Government of Tamil given in the Bengal Finance (Sales Tax) Act,
Nadu, [AIR 1986 SC 63] 1941, and therefore, the State Legislature was
(B) UP Cooperative Cane Unions Federation competent under Entry 54 of the List II to enact
versus West UP Sugar Mills Association, the concerned amendments levying sales tax on
[AIR 2004 SC 3697] the sale of lottery tickets.
(C) Commissioner of Sales Tax versus It was so held that the lottery tickets to the extent
Madhya Pradesh Electricity Board, [AIR that they comprise the entitlement to participate
1970 SC 732] in the draw are ‘goods’ properly called, squarely
(D) None of the above falling within the definition of that expression
Ans. (A) as given in the Tamil Nadu Act, 1959, and the
Case law: H Anraj versus Government of Tamil Bengal Act, 1941, and to that extent, they are not
Nadu, [AIR 1986 SC 63]. ‘actionable claims’ and in every sale thereof, a
transfer of property is involved.
Previous Years’ Questions
19. ‘Future goods’ has been denied, in the Sale of attached to or forming part of the land which are
Goods Act, 1930, under: agreed to be severed before sale or under the
[Punjab JS (Pre.), 2015] contract of sale.
(A) Section 2(5). 21. Section 9 of the Sale of Goods Act, 1930,
(B) Section 2(6). provides for:
(C) Section 2(7). [Bihar (APO) JS (Pre.), 2013]
(D) Section 2(8).
(A) agreement to sell at valuation.
Ans. (B)
(B) ascertainment of price.
Section 2(6) of the Sale of Goods Act, 1930:
(C) conditions and warranties.
future goods means goods to be manufactured
(D) Both (A) and (B)
or produced or acquired by the seller after the
Ans. (B)
making of the contract of sale.
Section 9 of the Sale of Goods Act, 1930,
20. Which of the following are ‘goods’ within the Ascertainment of price:
meaning of Section 2(7) of the Sale of Goods
(1) The price in a contract of sale may be fixed by
Act, 1930?
the contract or may be left to be fixed in manner
[Punjab JS (Pre.), 2011]
thereby agreed or may be determined by the
(A) Things attached to land which are agreed
course of dealing between the parties.
to be severed before sale
(2) Where the price is not determined in
(B) Things forming part of the land agreed to
accordance with the foregoing provisions, the
be served before sale
buyer shall pay the seller a reasonable price.
(C) Both (A) and (B)
What is a reasonable price is a question of
(D) Neither (A) nor (B)
fact dependent on the circumstances of each
Ans. (C)
particular case.
Section 2(7) of the Sale of Goods Act, 1930: goods
means every kind of moveable property other 22. Warranty as per Section 12 of Sale of Goods
than actionable claims and money; and includes Act, 1930, is:
stock and shares, growing crops, grass, and things [Haryana JS (Pre.), 2017]

(A) a stipulation essential to main purpose trade name, there is no implied condition as
of the contract. to its fitness for any particular purpose.
(B) a stipulation collateral to the main (2) Where goods are bought by description from
purpose of the contract. a seller who deals in goods of that description
(C) the same as a condition. (whether he is the manufacturer or producer
(D) a ground for repudiating the contract. or not), there is an implied condition that
(E) None of the above the goods shall be of merchantable quality,
Ans. (B) provided that, if the buyer has examined the
goods, there shall be no implied condition
Section 12(3) of the Sale of Goods Act, 1930,
as regards defects which such examination
Condition and warranty: (3) A warranty is a
ought to have revealed.
stipulation collateral to the main purpose of the
contract, the breach of which gives rise to a claim (3) An implied warranty or condition as to quality
for damages but not to a right to reject the goods or fitness for a particular purpose may be
and treat the contract as repudiated. annexed by the usage of trade.
(4) An express warranty or condition does not
23. Which one of the following Sections of the
negative a warranty or condition implied by
Sale of Goods Act, 1930, deals with the
this Act unless inconsistent therewith.
Doctrine of Caveat Emptor?
[Punjab JS (Pre.), 2015] 24. Under which provision of the Sale of Goods
Act, 1930, has it been provided that unless
(A) Section 15
the goods are ascertained, no property in
(B) Section 16
goods passes to the buyer?
(C) Section 17
(D) Section 18 (A) Section 18
Ans. (B) (B) Section 20
The Doctrine of Caveat Emptor is enshrined in (C) Section 23
Section 16 of the Sale of Goods Act, 1930. (D) Section 19
Section 16 of the Sale of Goods Act, 1930, Implied Ans. (A)
conditions as to quality or fitness: Subject to the Section 18 of the Sale of Goods Act, 1930, Goods
provisions of this Act and of any other law for the must be ascertained: Where there is a contract
time being in force, there is no implied warranty for the sale of unascertained goods, no property
or condition as to the quality or fitness for any in the goods is transferred to the buyer unless
particular purpose of goods supplied under a and until the goods are ascertained.
contract of sale, except as follows:
25. The rights of an unpaid seller have been
(1) Where the buyer, expressly or by implication,
listed in:
makes known to the seller the particular
[Haryana JS (Pre.), 2014]
purpose for which the goods are required,
(A) Section 45
so as to show that the buyer relies on the
(B) Section 46
seller’s skill or judgement, and the goods are
(C) Section 47
of a description which it is in the course of
(D) Section 49
the seller’s business to supply (whether he is
Ans. (B)
the manufacturer or producer or not), there
Section 46 of the Sale of Goods Act, 1930, Unpaid
is an implied condition that the goods shall
seller’s sights:
be reasonably fit for such purpose, provided
(1) Subject to the provisions of this Act and of any
that, in the case of a contract for the sale of
law for the time being in force, notwithstanding
a specified article under its patent or other
that the property in the goods may have passed

to the buyer, the unpaid seller of goods, as such, (A) becomes insolvent.
has by implication of law: (B) refuses to pay price.
(A) a lien on the goods for the price while he is (C) acts fraudulently.
in possession of them. (D) All of the above
(B) in case of the insolvency of the buyer a right Ans. (A)
of stopping the goods in transit after he has Section 50 of the Sale of Goods Act, 1930, Right
parted with the possession of them. of stoppage in transit: Subject to the provisions
of this Act, when the buyer of goods becomes
(C) a right of resale as limited by this Act.
insolvent, the unpaid seller who has parted with
(2) Where the property in goods has not passed
the possession of the goods has the right of
to the buyer, the unpaid seller has, in addition to
stopping them in transit, that is to say, he may
his other remedies, a right of withholding delivery
resume possession of the goods as long as they
similar to and co-extensive with his rights of lien
are in the course of transit, and may retain them
and stoppage in transit where the property has
until payment or tender of the price.
passed to the buyer.
28. Which of the following rights of an unpaid
26. The unpaid seller’s right of lien terminates:
seller can be exercised only when the buyer
[Haryana JS (Pre.), 2021] has become insolvent and not otherwise?
(A) when he delivers the goods to a carrier [Haryana JS (Pre.), 2013]
or other bailee for the purpose of (A) Right of lien
transmission to the buyer without (B) Right of resale
reserving the right of disposal of the (C) Right of stoppage in transit
goods. (D) Right to sue
(B) when the buyer or his agent lawfully Ans. (C)
obtains possession of the goods. Section 50 of the Sale of Goods Act, 1930, Right
(C) Both (A) and (B) of stoppage in transit: Subject to the provisions
(D) None of the above of this Act, when the buyer of goods becomes
Ans. (C) insolvent, the unpaid seller who has parted with
Termination of lien: the possession of the goods has the right of
(1) The unpaid seller of goods loses his lien stopping them in transit, that is to say, he may
thereon: resume possession of the goods as long as they
(A) when he delivers the goods to a carrier are in the course of transit, and may retain them
or other bailee for the purpose of until payment or tender of the price.
transmission to the buyer without
29. Section 57 of the Sale of Goods Act, 1932
reserving the right of disposal of the
deals with:
goods;
(B) when the buyer or his agent lawfully
(A) suit for price.
obtains possession of the goods;
(B) suit for damages for non-delivery.
(C) by waiver thereof.
(C) suit for damages for non-acceptance.
(2) The unpaid seller of goods, having a lien
(D) suit for return of goods.
thereon, does not lose his lien by reason
(E) None of the above
only that he has obtained a decree for the
Ans. (B)
price of the goods (Section 49).
Section 57 of the Sale of Goods Act, 1930, Damages
27. The unpaid seller can exercise his right of for non-deliver: Where the seller wrongfully
stoppage of goods in transit where the buyer: neglects or refuses to deliver the goods to the
[Bihar JS (Pre.), 2009] buyer, the buyer may sue the seller for damages
for non-delivery.

Recent and Relevant Cases
State of West Bengal versus Calcutta Club Limited, [AIR 2019 SC 310]
Point(s) to note: Sale of goods; Transaction of sale.
Sale of Goods
y Whether the supply of the various preparations by each club to its members involved a transaction
of sale within the meaning of the Sale of Goods Act, 1930.
y The State Legislature being competent to legislate only under Entry 54, List II, of the Seventh
Schedule to the Constitution the expression ‘sale of goods’ bears the same meaning which it has
in the aforesaid Act. Thus, in spite of the definition contained in Section 2(n) read with Explanation
I of the Act if there is no transfer of property from one to another there is no sale which would be
eligible to tax. If the club even though a distinct legal entity is only acting as an agent for its members
in matter of supply of various preparations to them no sale would be involved as the element of
transfer would be completely absent. This position has been rightly accepted even in the previous
decision of this Court.
y The expression ‘sale of goods’ as used in the entries in the Seventh Schedule to the Constitution has
the same meaning as in the Sale of Goods Act, 1930 [Gannon Dunkerley’s case].
—————
Rajratan Babulal Agarwal versus Solartex India Pvt Ltd, [Civil Appeal No. 2199 of 2021]
Point(s) to note: Statutory Law; Bare provisions; Analysis of Sections; Section 14.
Analysis of the Provisions of the Act
y Section 14(a) of the Act provides for an implied condition, in the absence of circumstances indicating
a different intention that the seller has a right to sell the goods. This is in a sale. In the case of the
agreement to sell as would be the case of future goods.
y Section 14(a) also provides that there is an implied condition that the seller ‘will have’ the right to
sell the goods when the property is to pass.
y Section 14(b) declares the existence of an implied warranty that the buyer will have and enjoy the
right of quiet possession of the goods.
y Section 14(c) provides for an implied warranty that the goods shall be free from any charge or
encumbrance in favour of a third party not declared or known to the buyer before or at the time of
the contract.
—————
Rajratan Babulal Agarwal versus Solartex India Pvt Ltd, [Civil Appeal No. 2199 of 2021]
Point(s) to note: Statutory Law; Bare provisions; Analysis of Sections; Section 15; Pollock and Mulla.
Analysis of the Provisions of the Act
Section 15 creates an implied condition in the case of a sale by description inter alia that the goods
must correspond with the description. Statements relating to ‘sale of specific goods by description’
and ‘conditions as to quality’ in the Sale of Goods Act by Pollock and Mulla.
Sale of Specific Goods by Description
It will be observed that the Section applies where there is a “contract for the sale of goods by
description”, that is to say where the goods are described by the contract. This usually applies to a
contract for the sale of unascertained or future goods, but it may apply to the sale of specific goods
as well, if the buyer contracts in reliance on that description. This may well occur in a case where the

buyer has never seen the goods and may also occur where he has seen them, but in the latter case it
is more difficult for the buyer to show that the sale was a sale by description, for usually the contract
for the sale of a specific article is a contract for the article as it is and any description of it at the most
amounts to a warranty, for the breach of which the buyer can only recover damages.
Occasionally, where goods are sold over the counter to a customer who asks for the goods by their
name, the sale may be a sale by description, but in general a customer who buys goods in a shop
across the counter is not buying by description. It would appear that the only sales not by description
are sales of specific goods as such.
“Specific goods may be sold as such when they are sold without any description, express or implied;
or where any statement made about them is not essential to their identity; or where though the goods
are described, the description is not relied upon, as where the buyer buys the goods such as they are.”
Conditions as to Quality
“This Section, it will be observed, deals only with the condition that the goods should correspond
with the description. In the older cases stipulations, express or implied, as to the quality of the goods
were treated as part of their description: the Act, however, deals with them as separate conditions in
Section 16(2) and Section 17.”
—————
Competition Commission of India versus State of Mizoram, [Civil Appeal No. 10820–10822 of 2014,
Decided on 19-01-2022]
Point(s) to note: Right covered by a lottery ticket; Goods; Sale of goods.
Right Covered by a Lottery Ticket
y The right covered by a lottery ticket is nothing but an actionable claim and, therefore, it was concluded
from the definition of ‘goods’ under the Sale of Goods Act, 1930, that they were excluded from such
definition and other tax statutes.
y The lotteries, being akin to gambling activities, came under the purview of the doctrine of res extra
commercium. The lottery activity being in the nature of res extra commercium could not be covered
by the Competition Act.
y Clause (7) of Section 2 of the Sale of Goods Act specifically excludes actionable claims from the
ambit of goods. A lottery ticket has been held to be only an actionable claim and was, thus held to
not be a good. Where an actionable claim was sought to be included within the definition of ‘goods’,
it was specifically so done.
—————
M/s Vellanki Frame Works versus The Commercial Tax Officer, [2021 Latest Caselaw 21 (SC)]
Point(s) to note: Sale occasions import; Sale of Goods; Central Sales Tax Act, 1956; Definition of Sale
in CST and SOG Act.
y Sale under CST Act
The definition of ‘sale’ in the Central Sales Tax Act, 1956 shows that the word ‘sale’ has been given
a very wide meaning so as to include not only the sale of goods, but also the transactions, namely,
a transfer of goods on hire–purchase system. Further, the use of words ‘sale of goods’ in Section 3
of the Act and the words ‘contract of sale’ in Section 4(2) of the Act have been assigned the same
meaning which is wider than the meaning of sale in the general law. In such a situation the word
‘sale’ defined in Section 2(g) of the Act and employed in Section 3 and other Sections of the Act
would embrace not only completed contract, but also the contract of sale or agreement of sale if

such contract of sale or agreement of sale provides for movement of goods, or movement of goods
is incident of the contract of sale. This matter may be examined from another angle. An agreement
to transfer goods to the buyer for a price is an important element of sale and the same is also borne
out from Section 4 of Sale of Goods Act.
y Sale under SOGA
If Section 4 of the Sale of Goods Act is read along with Sections 3 and 4 of the Central Sales Tax Act,
1956, it would mean an agreement to sell would also be a sale within the meaning of sale provided
such agreement of sale stipulates for transfer or movement of goods or movement of goods is
incident of the contract of sale and in that case, such movement of goods would be deemed to
be occasioned by the sale. It is immaterial that actual sale does not take place at that time of
movement of goods and takes place later on. This interpretation of Section 3(a) of the Act if applied
to sub-section (2) of Section 5 of the Act, would mean that if an agreement for sale stipulates
import of goods or import of goods is incident of contract of sale and goods have entered the import
stream, such import would fall within the expression ‘sale occasions import’.
—————
Skill Lotto Solutions versus Union of India, [2020 SCC Online SC 990]
Point(s) to note: Sale of goods; Consumption; Schedule VII of the Constitution; Extended definition of
sale.
Consumption by an Owner of Goods
y Consumption by an owner of goods in which he deals is not a sale within the meaning of sale of
goods. It was held that extended definition, which includes consumption by a retail dealer of motor
spirit or lubricants is beyond the competence of the State Legislature.
y “Consumption by an owner of goods in which he deals is therefore not a sale within the meaning
of the Sale of Goods Act and therefore it is not ‘sale of goods’ within the meaning of Entry 54 List
II Schedule VII of the Constitution. The legislative power for levying tax on sale of goods being
restricted to enacting legislation for levying tax on transactions which conform to the definition
of sale of goods within the meaning of the Sale of Goods Act, 1930, the extended definition which
includes consumption by a retail dealer himself of motor spirit or lubricants sold to him for retail
sale” is beyond the competence of the State legislature. But the clause in the definition in, Section (1)
“and includes the consumption by a retail dealer himself or on his behalf of motor spirit or lubricant
to him for retail sale which is ultra vires the State Legislature because of lack of competence under
Entry 54 in List II Schedule VII of the Constitution is severable, from the rest of the definition, and
that clause alone must be declared invalid”.
y The Constitution framers were well aware of the definition of goods as occurring in the Sale of
Goods Act, 1930, when the Constitution was enforced. By providing an inclusive definition of ‘goods’
in Article 366(12), the Constitution framers never intended to give any restrictive meaning of goods.
Practice Questions
1. What is sale? What are the essentials of a cases. [Delhi Judicial Service Examination,
valid sale? What is contract for sale? What are 2015]
the differences between the two? [Madhya 3. Write a short note on time of passing of
Pradesh Judicial Service Examination, 2015] property in sale of goods. [Delhi Judicial
2. Caveat emptor is a defence available to Service Examination, 2014]
every seller. Discuss with the help of decided

4. What are the exceptions available to the rule Act? [Delhi Judicial Service Examination,
of caveat emptor? [Delhi Judicial Service 1999]
Examination, 2005 and 2011] 8. Define an unpaid seller. Discuss his right of
5. What are the rights of unpaid seller against stoppage in transit. [Delhi Judicial Service
the goods? How the rights of unpaid seller Examination, 1999]
will vary in case of part delivery of goods? 9. Explain the right of stoppage in transit.
[Haryana Judicial Service Examination, 2011] [Rajasthan Judicial Service Examination,
6. Define ‘sale’ and ‘agreement to sell’. [Bihar 1984]
and Jharkhand Judicial Service Examination, 10. Explain the meaning and scope of caveat
2011] emptor, adding illustrations. [Bihar and
7. What is the effect of delivery of a part of Jharkhand Judicial Service Examination,
goods to the buyer under the Sale of Goods 1975]
Solved Question
Q. Explain the meaning and scope of caveat emptor, adding illustrations.
Ans. The doctrine of caveat emptor is an integral part of the Sale of Goods Act. It simply means ‘let
the buyer beware’. The doctrine of caveat emptor provides the principle of consumer protection. This
doctrine lays the responsibility of their choice on the buyer themselves. The doctrine of caveat emptor
is embodied in Section 16 of the Act. The doctrine is an essential concept for buyers and sellers. In the
said Act, buyer means a person who either buys or agrees to buy goods and seller means a person who
either sells or agrees to sell goods.
Section 16 of the Act states that there is no implied condition or warranty as to quality or fitness for
any particular purpose of goods supplied. Section 16 prescribes warranties, which may be implied in
certain circumstances, such as that the goods shall be of merchantable quality and are fit for purpose.
Under sub-section (1) of Section 16, it provides exemptions to the said doctrine. This doctrine shall
not apply if the buyer makes known to the seller the particular purpose for which he is purchasing
goods and relies on skill and judgement of the seller. Intention of the makers while enacting the said
doctrine was to ensure that, except in cases of fraud by the seller, the buyer uses his diligence, skill
and judgement while making purchases after he is assured of the quality of the goods.
Illustration is, ‘X’ brought a horse from ‘Y’. ‘X’ wanted the horse to enter in a race. Later it turns out that
the horse was not capable of running a race on account of being lame which ‘X’ did not inform ‘Y’ of
his intention. So, ‘Y’ will not be responsible for the defects of the horse. Here, the doctrine of caveat
emptor will apply.
A simple principle of law is summed up in the maxim caveat emptor and is based on the presumption
that the buyer is relying on his own skill and judgement when he elects a purchase.
The Supreme Court in the 2009 case of Aafloat Textiles India Pvt Ltd, discussed the doctrine of caveat
emptor, i.e., let the buyer beware. It is one of the settled maxims, applying to a buyer who is bound
by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious, or
which might have been known by proper diligence.
Caveat emptor does not mean, either in law or in Latin, that the buyer must take chances. It means
that the buyer must take care. Caveat emptor is the ordinary rule in contract. A vendor is under no
duty to communicate the existence even of latent defects in his wares unless by act or implication he
represents such defects not to exist. Caveat emptor qui ignorare non debuit quod jus alienum emit is

a maxim meaning, ‘let a buyer beware: who ought not to be ignorant that he is purchasing the rights
of another’.
Upon a sale of goods, the general rule with regard to their nature or quality is caveat emptor, so
that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods
not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the
general rules of law there is no warranty of quality arising from the bare contract of sale of goods,
and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all
risk of defect in the goods, unless there are circumstances beyond the mere fact of sale from which a
warranty may be implied. No one ought in ignorance to buy that which is the right of another. The buyer
according to the maxim has to be cautious, as the risk is his and not that of the seller.

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1 Sale of Goods Act, 1930

Applicability of the Act

Section 66 of the Act: Savings Clause

Objective of the Act

Sale of Goods Act, 1930 1

Statement of Objects and Reasons

2 Sale of Goods Act, 1930

Sale of Goods Act, 1930 3

4 Sale of Goods Act, 1930

List of Amending Acts and Adaptation Orders

Sale of Goods Act, 1930 5

The Sale of Goods Act, 1930

Preliminary Contract Formation Effect of

Buyer The Contract Goods Stipulation Implied or

Performance of Contract Rights of Unpaid Seller Suit, Specific Performance

6 Sale of Goods Act, 1930

Stock and Shares

Existing goods Contingent goods Future goods

Specific goods Ascertained Unascertained

Sale of Goods Act, 1930 7

8 Sale of Goods Act, 1930

Sale Contract of Sale

It is where the ownership of goods is to be

Section 21 and 24, Sale of Goods Act, 1930,

Essential Elements of Contract of Sale

General Property Special Property

It means only some of rights. For example, right to use and

Absolute and Conditional Sale

Sale of Goods Act, 1930 9

Condition precedent Condition subsequent

Absolute Condition Precedent Condition Subsequent

Sale Agreement to Sell

It is an executed contract. It is an executory contract.

It creates right in rem. It creates right in personam.

Q. Distinction between contract of sale and hire purchase.

Contract of Sale Hire Purchase

10 Sale of Goods Act, 1930

Sales tax can be imposed. Sales tax cannot be imposed.

Conditions and Warranties

Conditions (Essentials) Warranties (Collateral)

Implied Express Implied Express

Implied Condition Express Condition Implied Warranty Express Warranty

Assumed by law Stated definitely Assumed by law Stated definitely

Stipulation as to Time (Section 11, Sale of Goods Act, 1930)

Sale of Goods Act, 1930 11

Stipulation as to Time of Payment Stipulation as to Performance of Other

Circumstances under When Conditions to Be Treated as Warranty

12 Sale of Goods Act, 1930

Implied Condition to Title/Ownership [Section 14(a)]

Implied Condition in a Sale by Description (Section 15)

Implied Condition for a Sale by Sample [Section 17(2)]

Sale of Goods Act, 1930 13

Sale by Sample Sale by Description

Implied Condition as to Quality or Fitness [Section 16(1)]

Implied Condition of Merchantable Quality [Section 16(2)]

Implied Condition by Trade Usage [Section 16(3)]

14 Sale of Goods Act, 1930

Implied Warranty as to Quiet Possession [Section 14(b)]

Implied Warranty as to Freedom from Encumbrances [Section 14(c)]

Rule of Caveat Emptor

Effects of Contract: Passing of Properties

Property Passes When Intended to Pass

1. Passing of Property in Specific Goods