You are on page 1of 49


ACT, 1930

• The Sale Of Goods Act 1930 deals with the law relating to
sale of goods in India.

• The term ‘goods’ means every kind of movable property,
other than money and actionable claims.

• The act containing 66sections came into force from 1st July,

• “A contract of sale of goods is a contract whereby the
seller transfers or agrees to transfer the property in
goods to a buyer for a price.” (sec 4)

• Consists of the following:
 Sale [ or Absolute Sale]
Agreement to sell [ or Conditional Sale]

• Sale or Absolute Sale
Where the property(ownership) in the goods is immediately
transferred from the seller to buyer, and nothing is left on the part
of the seller, there is a sale or absolute sale. Counter sale in a shop
is a sale or an absolute sale.
• Agreement to sell or conditional sale
Where the transfer of property(ownership) in the goods shall take
place in future or on the fulfillment of certain conditions, it shall be
an agreement to sell or a conditional sale.
The property in goods shall not be transferred until and unless

When seller and buyer agrees to sell and buy some goods at a price. there is an agreement between the two Now only transfer of property or ownership remains If immediately transfers it becomes ‘sale’ If transfers only after fulfilment of some conditionsremain as an agreement to sell till the condition is fulfilled .HOW AGREEMENT TO SELL BECOMES A SALE ? • In the 1st stage every contract of sale is an agreement to • • • • sell.

one the seller and the other the buyer.There must be two parties. 3. AGREEMENT FOR THE TRANSFER OF OWNERSHIP:there should be immediate transfer or an agreement to transfer the general property in goods sold or agreed to be sold . A VALID CONTRACT :-It should satisfy all the essentials of a valid contract. 2. TWO PARTIES :.ESSENTIALS OF A CONTRACT OF SALE 1.

Goods means every kind of movable property other than actionable claims and money. The contract was for sale of trees as movable goods. . grass. Timber Operators & Contractors Ltd.Includes stocks and shares.Growing crops. [ Kurseer vs.Subject matter must be ‘goods’.4. trees and things attached to or forming part of the land which are agreed to be severed before sale or contract of sale Example – where the trees were sold so that they were to be cut out and separated from land and taken away by the buyer. GOODS :. .]  a debt is not goods because it can only be assigned as per .

Can be transferred by Negotiable instruments act. actionable claims and immovable property are excluded. . Example. Actionable claims :. Money which can be enforced by a legal action or a suit. bill of exchange. 1881 Immovable property :. of immovable property is . promissory note tender – essential aspect of every sale – money itself cannot be a subject matter.

PRICE:.5. .Consideration can be partly in money and partly in goods or some other articles of value. .9000 in exchange of old refrigerator and rs.6000 in cash. consideration for transfer must be money paid or promised. It is a sale. .to constitute a valid contract of sale. Example -: a refrigerator company supplies a new refrigerator of rs.However an existing debt due from the seller to the buyer is sufficient. For example remuneration for work or labour. .Where there is no money consideration-no contract of sale.

Difference between Sale and agreement .

2 Creation of right Sale creates a jus in rem i. risk and property do not pass to the buyer immediately . where both the parties are yet to perform their mutual promises within agreed time. i.Difference between Sale and Points of sale Agreement to sell distinctio Agreement to Sell n 1 Nature of contract Sale is an executed contract. where one of the parties has already performed his part of the contract Agreement to sell is an executory contract.e right on the goods against the whole world It creates a jus-in-personam.e personal right only against the person in default for fulfilling his part of agreement 3 Passing of property The property in the goods passes to the buyer with the risk In this.

the seller can refuse to deliver the goods to the official assignee or receiver until paid in full. . and resale for non performance of the contract 5 Risk of loss The loss will be borne by the buyer even if the possession of goods is with the seller The loss will be borne by the seller since the ownership in the goods has not passed to the buyer 6 Insolvency of buyer before he pays for the goods if the buyer becomes insolvent before he pays the price of the goods.4 Difference between Sale and Remedies on The seller is entitled to sue The seller has the right Sell –Contd breach ofAgreement contract for the priceto of the goods and only to. stoppage in transit. sue for damages also has a right of lien. if the buyer becomes insolvent and has not paid the price.. the seller will have to deliver the goods to the official assignee or receiver and he can only claim dividend for the price of the goods.

The seller can dispose of the goods as he likes and the original buyer can sue him for breach of contract only. .7 8 Difference between Sale and Insolvency of The buyer is entitled to The buyer has to prove the Agreement to from Sell seller if the receive the goods the –Contd.. He cannot compel receiver to sell and deliver the goods Right of resale The property is with the buyer and as such the seller (in [possession of goods after sale ) cannot resell the goods. amount he has paid and buyer has already paid the price Official Assignee or Receiver can only claim a rate-able dividend.

Difference between sale and contract of sale .

CONTARCT OF SALE – HOW IT IS MADE? A contract of sale be made in writing or by word of mouth. instalments or future date May be for existing or future goods Posses all essentials of an ordinary contract . or partly by word of mouth or may be implied from the conduct or dealings of the parties There must be a offer to sell and acceptance to buy Immediate delivery.

transfers or agrees to transfer property in goods.Difference between sale and contract of sale • Sale.immediate transfer of ownership of goods or property • Contract of sale. . it consisit of sale as well as agreement to sell.


Return The goods are returned after There is no return of goods the specified time or from the buyer to the seller. directions of the bailor. Usage A bailee can use the goods The buyer may use the goods only according to the in any way he likes. accomplishment of the unless there is breach. Possession of goods is transferred to the bailee. Ownership resides with the bailor. Ownership Ownership is transferred to the buyer. . purpose.  Sale Bailment Possession Possession of goods is transferred to the buyer.

Once the sale is transacted.Consideration The consideration is an undertaking The consideration is the price to return the goods after the in terms of money. the seller keeps the goods until he decides to sell them to another. Temporary. The bailee has to return the goods to the bailor once the specified time is passed. Charges The question of any charges to be paid by the seller to buyer or vise versa does not arise. . Duration Final. accomplishment of the purpose. The bailor has to repay the charges which the bailee has incurred in keeping the goods safe.

EXAMPLE • when a bank holds a borrower's asset as collateral for a secured loan. In this case.” . the bank is the bailee and the borrower is the bailor. this is a form of bailment.


• In case of sale. the transfer of property in goods takes place immediately. it is called a sale. the property in goods is transferred from the seller to the buyer. . “where under a contract of sale.SALE • According to sec.4(3).

.MORTGAGE • Mortgage is an important method of creating charge over securities while granting loans and advances to borrowers. • It is a method of creating charge on immovable properties like land and buildings.

mortgage is defined as follows: “ A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan. . an existing or future debt.• According to Section 8 of the Transfer of Property Act 1882. or the performance of an engagement which may give rise to a pecuniary liability”.

• The person who transfers the interest in specific immovable property is called the mortgagor and the person to whom such interest is transferred is called the mortgagee. and the instrument by which the mortgage is created is called the mortgage deed. • The advance of money in respect of which the mortgage is effected is called the mortgage money. .

where as. ownership of the goods as a whole is transferred from the seller to the buyer. . consideration is the price.Differences b/w Sale& Mortgage • In a sale. but in a mortgage. consideration is the advance of loan and securing of the debt. but in the case of mortgage. ownership of the goods remains vested in the mortgagor. only the possession is transferred and ownership transfer is only of a limited interest. • In a sale. • The buyer becomes absolute owner of goods in a sale.


  . the payments may be made by the buyer in lump sum on a future date.HIRE PURCHASE SYSTEM  A trader could sell goods either for cash or for credit. For goods sold on credit. or in installments spread over for a specified period of time.

  .When goods are sold on credit. for which payment is made by the buyer in installments over a period of time. it is called hire purchase system or installment system.

Hire Purchase System refers to the system wherein. on payment of the last installment. The payment for the goods will be made by the buyer in installments. If the buyer pays all the installments. Hence. the ownership of the goods will be transferred. if the buyer does not pay for any installment. the system is called Hire Purchase System. the goods will be repossessed by the seller and the money paid on earlier installments will be treated as hire charges for using the goods. the transaction may result in purchasing of goods by the buyer or in hiring the goods. So. under this system. However. . the seller of goods delivers the goods to the buyer without transferring the ownership of goods.

. Y can recover the TV set from X and the five instalments paid by X would be treated as hire charges so that X will not be entitled to recover anything from Y. X defaults.Few examples: X takes a TV set from Y on hire. 3000 per month for 10 months and if he pays regularly for 10 months the TV set will become his property. After making the payment for 5 months. It is agreed that X will pay Rs.

1930 1. In case of sale. . A ‘sale’ is governed by the sale of Goods Act. 4.SALE HIRE PURCHASE 1. In case of Hire purchase. 1972. the ownership of goods is transferred to buyer on payment of all installments 3. (if the lump sum payment is made immediately on transfer of ownership and possession of goods. In case of sale. The hire purchaser pays for the price of goods and also some amount of interest. In case of hire purchase. the payment is made in installments 4. it is called Cash Sale and if the payment is made on a specified future date. The buyer pays only for the price of goods. the ownership of the goods is transferred to the buyer immediately. 2. it is called credit sale 3. the buyer makes payment in lump sum. 2. Hire purchase is governed by the Hire Purchase Act.

On non-payment of the consideration the seller cannot take back the goods. In this case. but can only take legal action on buyer. on payment of last installment). When the hire purchaser becomes insolvent.) 6. 8. and hence need not undertake the risk of loss. 6. the seller can reposes the goods. until the payments of last installment. Either the buyer or the seller can terminate the contract at any point of time. nor the buyer can terminate the contract (unless it is for genuine reason like damage of goods etc. . neither the seller. the seller has to undertake the risk of loss 7.5. Once a sale has taken place. A sale is subject to levy of sales tax at the time of contract of sale. 7.e. 5. When the buyer becomes insolvent. the seller can re-possess the goods. 8. the sales tax will be lerviable at the time of ownership (i. On non-payment of any installment.


PASSING OF PROPERTY – 5 RULES • Rule 1 – Goods in Deliverable State • Nature • • Unconditional sale • Specific goods • In deliverable state Time of Transfer • When contract is made • Irrelevant that price or delivery is postponed 35 .

PASSING OF PROPERTY – 5 RULES • Rule 2 – Goods to be put in Deliverable State • Nature • • Seller required to do something to put goods into deliverable state Time of Transfer • Seller has done the required things • Notice given to buyer 36 .

tested • Nature • • Seller required to do some act to ascertain price of specific goods Time of Transfer • Act or thing has been done • Notice given to buyer 37 .PASSING OF PROPERTY – 5 RULES • Rule 3 – Goods to be weighed. measured.

PASSING OF PROPERTY – 5 RULES • Rule 4 – Future Goods sold by Description • Nature • Goods not yet produced • Ordered by description • Time of Transfer • Produced and in a deliverable state • Unconditionally appropriated to the contract • By buyer with assent of seller. or • By Seller with assent of buyer 38 .

PASSING OF PROPERTY – 5 RULES • Rule 5 – Goods on Approval • Nature • • Specific goods “on approval” or with return privileges Time of Transfer • Buyer does something to signify acceptance or approval of goods or adopts the contract • Lapsing of a reasonable period of time or a fixed period of time 39 .


.Who is an Unpaid Seller? • Seller of the goods who has not been paid or tendered the whole of the price or • One who has received payment in the form of bill of exchange or other negotiable instrument which has been dishonored.

Rights of an Unpaid Seller Rights of an unpaid seller against the good  Right of Lien  Right of Stoppage in Transit  Right of Resale Rights of an unpaid seller against the buyer personally  Suit for price  Suit for damages for non-acceptance of delivery  Suit for interest or special damages .

RIGHT OF LIEN  A lien is a right to retain POSSESSION of goods until payment of the price .

47 • Applicability:  Where the goods have not been sold on credit  Goods sold on credit. credit-term expires  Buyer becomes insolvent. seller possesses goods .Right of Lien of Unpaid Seller –Sec.

Right of Stoppage in Transit-Section 50 • This is just an extension of Right of lien and this means the right of stopping the goods while they are on the way to the buyer’s place .

Right of Stoppage in Transit-Sec 50  Essentials :  Seller must be partially/wholly unpaid  Buyer must have become insolvent  Goods must be in transit .

.Right of Resale of unpaid seller -Section 54 • Unpaid seller can resale his goods after executing his Right of Lien on retaining his goods or after exercising his Right to Stoppage in Transit upon insolvency of the buyer under some circumstances.

Circumstances for Resale:  Where goods are perishable  Where seller gives notice to buyer of his intention to resell and buyer does not pay the price within a reasonable time after the notice  Where seller has expressly reserved his right of resale in case of default .

Sec. 55 & 56 – Other Rights Sue the buyer for price of goods Seller may sue buyer for damages for wrongfully neglecting/refusing to accept the goods Recover interest from buyer where there is a specific agreement to that effect. If there is no agreement. seller may charge interest on price when it becomes due .