Professional Documents
Culture Documents
Introduction
Definition clause of the Sale of Goods Act, 1930
Buyer
Delivery
Goods
Specific goods
Formation of a contract
What is a contract of sale
Absolute and conditional contracts of sale
Difference between sale and agreement to sell
What are the formalities of the contract
Subject matter of a contract
Existing or future goods
Goods perishing before making a contract
Goods perishing before sale but after an agreement to sell
What are the conditions and warranties
Implied conditions
Implied conditions as to title
Implied condition in sales by description
Implied condition as to the quality of fitness
Implied condition on sale by sample
Implied warranties
Implied warranty of quiet possession
Implied warranty that goods are free from encumbrances
Expressed conditions and warranties
Effects of the contract
Transfer of property between seller and buyer
Transfer of property in the sale of specific or ascertained goods
Property passes when intended to pass
Specific goods in a deliverable state
Specific goods to be put into a deliverable s\
tate
Specific goods are in a deliverable state but the seller has to do something to ascertain the price
Transfer of property in the sale of ascertained goods and appropriation
Transfer of title
Sale by the person, not the owner
Exceptions to Section 27 of the Sale of Goods Act, 1930
Sale by a mercantile agent (Section 27)
Sale by one of the joint owners (Section 28)
Sale by a person in possession under a voidable contract (Section 29)
Sale by a person who has already sold the goods but continues to have possession [Section 30 (1)]
Sale by buyer obtaining possession before the property in the goods has vested in him [Section 30 (2)]
Performance of the contract
Seller
Rights of the seller under the Sale of Goods Act, 1930
Duties of the seller under the Sale of Goods Act, 1930
Buyer
Rights of the buyer under the Sale of Goods Act, 1930
Duties of the buyer under the Sale of Goods Act, 1930
Rights of an unpaid seller under the Sale of Goods Act, 1930
Right to lien
Rights of stoppage of goods in transit
Suit for breach of contract
Suit for price by the seller against the buyer
Suit for damages by the seller against the buyer for non-acceptance of the goods
Suit for damages by the buyer against the seller for non-delivery of the goods
Suit for specific performance by the buyer against the seller
Suit by the buyer against the seller for breach of warranty
Suit for damages by seller or buyer for anticipatory breach of contract
Interest by way of damages and special damages
Frequently Asked Question (FAQs)
What are the essential things covered under the Sale of Goods Act, 1930?
What happens if an agreement to sell or a contract of sale is broken?
What kind of risk is associated with the sale of goods in India?
Introduction
We are aware that every business entity runs by buying or selling commodities. In India, such sales of
goods are governed by the Sale of Goods Act, 1930. This Act has been codified as a separate enactment of
the law relating to the sale of goods, which was contained in Sections 76 to 123 of the Indian Contract Act
of 1872. Those sections of the Contracts Act have been repealed by the Sale of Goods Act. This was done
because the provisions of the Contract Act were found to be inadequate to deal with the new situations
that were arising due to an increase in mercantile transactions in the wake of rapid industrialisation.
Hence, a new law was formed to deal with the sale of goods which incorporates various provisions of the
English Sale of Goods Act, 1893. However, despite the separate legislation in terms of the Sale of Goods
Act, the Contract Act continues to apply to the contracts relating to the sale of goods. The Act lacks in
defining some of the expressions and words that are otherwise defined in the Contract Act. In this article,
the author will be discussing the Sale of Goods Act, 1930 in detail by analysing all the important provisions
and case laws.
1. Accepting the delivery of the goods when the seller is willing to fulfil
their end of the bargain. (Section 31)
4. Should insist on getting the goods delivered at a fair time. [Section 36(4)]
6. The buyer should accept the risk of deterioration during transit when the
goods are to be delivered somewhere other than the location where they
were purchased (Section 40)
8. After the seller offers delivery, the buyer must accept delivery of the
goods in a timely manner (Section 44)
10. To cover losses for failing to accept the goods. (Section 56)
The unpaid seller, by the implications of Section 46, has the following rights:
Right to lien
The lien of an unpaid seller is a right to retain possession of the goods until
tender or payment of the price. The unpaid seller is entitled to a lien only in
three situations, as mentioned in Section 47 of the Act. These are as follows:
3. If the buyer becomes insolvent before the price is paid, and the seller is in
possession of the goods, he is entitled to retain possession even if the
goods are sold on credit and the term of credit has not expired.
As was already noted, a lien depends on the actual ownership of goods. When
the possession is removed from the seller, the lien disappears along with it, as
noted in Section 49. In the following situations, an unpaid seller of goods loses
his lien thereon:
This right entails stopping the products while they are in a carrier’s control or
lodged at any point during transmission to the buyer, regaining ownership of
them, and holding onto them until the price is tendered or paid. To exercise the
right, the seller must be unpaid, the buyer must be insolvent, the seller must
have parted with possession of the goods, and the buyer must not have
acquired them.
He could be held accountable for the conversion if he offers the goods to the
buyer while making an error. The seller must put up with the redelivery
expenses.
Sub-section (1) of Section 55 deals with a contract where the property in the
goods has passed irrespective of delivery. This will involve two types of cases:
1. Non-delivery
Suit for damages by the seller against the buyer for non-acceptance of the
goods
Section 56 says that where the buyer wrongfully neglects or refuses to accept
and pay for the goods, the seller may sue him for damages for non-acceptance
of the goods.
The Indian Contract Act of 1872’s provisions Section 73 and Section 74 serve
as the foundation for calculating the damages. In accordance with Section 73
of the Indian Contract Act, when a contract is broken, the party who suffers as
a result of the breach is entitled to receive compensation for any loss suffered
by him as a result, which naturally results from the breach in the ordinary
course of events or which the parties knew would likely occur when they
entered into the contract.
The methods that were available for resolving the discomfort brought on by
the contract’s non-performance must also be taken into consideration when
calculating the loss or damage brought on by a breach of contract.
The day on which the contract should have been fulfilled by delivery and
acceptance as specified by the agreement, or, in the absence of a time frame, at
the moment of non-performance, is the date at which the market price is to be
determined.
Suit for damages by the buyer against the seller for non-delivery of the goods
The buyer may file a lawsuit against the seller for non-delivery damages if the
seller willfully neglects or declines to deliver the goods to the buyer
under Section 57. The buyer has all the rights of an owner against individuals
who act on the property in a way that violates his rights once it has passed,
provided that he is entitled to instant possession. Therefore, if the seller
wrongfully resells them, the buyer may bring a lawsuit against both the seller
and the second buyer. However, the rights against the latter may be limited by
the provisions of sections30 and 54.
The seller cannot be accused of ignoring or refusing to deliver the goods if the
buyer has not made payment for earlier deliveries within 15 days of the date of
delivery and the seller withholds delivery. The seller would have the right to
demonstrate that it would be impossible for him to fulfil his end of the bargain.
Section 59 of the Act deals with four remedies for the breach of warranty.
These are as follows:
1. If the loss caused by the warranty violation is less than the purchase
price, the buyer may request a reduction in the price. The rule of a price
reduction or extinction is not a set-off and only applies to claims that are
cross-subject to the same contract.
2. If the loss matches the price, the buyer may refuse to pay it at all.
3. The buyer may refuse to pay the price as well as claim the excess if the
loss exceeds the cost.
A breach of warranty does not give the buyer the right to return the goods, and
his only options are those listed in Section 59, which are to hold the seller
liable for the breach of the warranty by reducing or eliminating the price or
suing the seller for damages as a result. According to the definition of
‘warranty’ provided in Section 12(3), only the buyer has the right to file a
claim for damages when the warranty is breached.
This Section outlines the procedures a buyer who, in either scenario, has a
claim for damages may use to pursue it. It does not address situations in which
a fraudulent misrepresentation may allow the buyer to void the contract or
situations in which, according to the contract’s specific terms, the buyer may
return the goods in the event of a warranty breach.
Section 60 outlines the procedure a buyer who, in either scenario, has a claim
for damages may use to pursue it. It does not address situations in which a
fraudulent misrepresentation may allow the buyer to void the contract or
situations in which, according to the contract’s specific terms, the buyer may
return the goods in the event of a warranty breach.
Very frequently, situations may emerge where the promisor declares that he
will not carry out his share of the performance when the time for performance
approaches, even when the performance is to take place in the future. Not
doing an act while it is not yet contractually required is not a breach. For this
reason, this Section allows the promisee the choice of treating the contract as
cancelled in advance or waiting until the day of performance to treat it as
subsisting.
The right to seek interest, extra damages, or money paid in the absence of
consideration is preserved under Section 61. The Interest Act of 1839 allowed
interest to be awarded in the following circumstances at the going rate:
1. From the due date specified in the contract, on all debits or certain sums
payable at a specific time under a written instrument.
2. In other situations, interest is charged beginning on the date the written
demand is made.
In the case of M/s M.K.M. Moosa Bhai Amin, Kota v. Rajasthan Textile Mills,
Bhawanimandi (1974), the plaintiff sued for the cost of the delivered products
as well as interest on the unpaid cost. The District Judge rejected the interest
claim on the grounds that there was no contract to pay interest if the cost of the
supplied items was not paid in full. The plaintiff argued that under Section
61(2) of the Sale of Goods Act, 1930, the plaintiff was entitled to a reasonable
interest even in the absence of the contract. The supply had been made up until
September 18, 1962, and under normal circumstances, the defendant should
have paid the cost of the goods within a reasonable amount of time after
delivery. However, the payment was over a year late, forcing the plaintiff to
file a lawsuit to recover the money. According to a ruling, in these situations,
the lower courts ought to have erred on the side of the plaintiff and applied
Section 61(2) of the Sale of Goods Act to grant interest on the amount of the
purchase price of the goods. The Rajasthan High Court permitted interest at
6% annually, which was regarded as a reasonable rate of interest.
The Supreme Court in the case of Marwar Tent Factory v. Union of India
(1989) observed that an award of interest to a seller on an amount of price not
paid by the buyer within a reasonable time cannot be denied merely because in
the notice served under Section 80 of the Code of Civil Procedure (CPC),the
seller had not claimed interest. The Court held that, on the facts, the seller is
entitled to a decree of interest at a rate of 6 percent per annum on the unpaid
price from the date of delivery of goods.