SALES OF GOODS ACT -

1930
Mr. Ravindra S.Rawat
FORMATION OF CONTRACT OF
SALE
Contract of sales of goods{Sec-4(1)}:
A contract of sales of goods is contract whereby
the seller transfer or agrees to transfer the
property or goods to the buyer for a price. There
may be a contract of sale between one part
owner and another.
Sale & Agreement to sell {(Sec-4(3)}
Where a contract of sale the property in goods is
transferred from the seller to buyer, the contract
is called a ‘Sale’ but where the transfer of the
property in the goods is to take place at future
time or subject to some conditions thereafter to
be fulfilled the contract is called an ‘Agreement
to sell’.
ESSENTAILS OF CONTRACT OF
SALE
1) Two parties.

2) Goods

3) Price

4) Transfer of general property.

5) Essential elements of a valid contract.

 Difference between Sale & Agreement to Sell
Basis Sale Agreement to Sell

Transfer of Transfer of ownership of goods takes place Transfer of ownership of goods is

ownership immediately. to take place at a future time or
subject to fulfilment of some
condition.
Executed or It is an executed contract because nothing It is an executory contract because
Executory remains to be done. something remains to be done.
Contract

Conveyance Buyer gest a right to enjoy the goods against
of property the whole world including seller. Therefore,
a sale creates jus in rem(Right against
property).
Transfer of Transfer of risk of loss of goods takes place
risk immediately because ownership is
transferred. As a result, in case of
destruction of goods the loss shall be borne
by the buyer even though the goods are in
the possession of the seller.
Buyer done not get such right to
enjoy the goods. It only creates jus
in personam (Right against the
person).
Transfer of risk of loss of goods
does not take place because
ownership is not transferred. As a
result in case of destruction of
goods the loss shall be borne by
the seller even though the goods
are in the possession of he buyer.
Rights of seller Seller can sue the buyer for the price Seller can sue the buyer for
against the even though the goods are in his damages even though the goods are
buyer’s breach possession in the possession of the buyer.

Rights of buyer Buyer can sue the seller for damages Buyer can sue the seller for
against the and can sue the third party who bought damages only
seller’s breach those goods for him.

Insolvency of Buyer can claim the goods from the
Seller official receiver or assignee because the
ownership of goods has transferred to
buyer.
Insolvency of Seller must deliver the goods to the
buyer official receiver or assignee because the
ownership of goods has transferred to
the buyer, He can only claim the
rateable dividend for the unpaid price.
Buyer cannot claim the goods even
when he has paid the price because
the ownership has not transferred to
the buyer. The buyer who has paid
the price can only claim rateable
dividend
Seller can refuse to deliver the
goods unless he is paid full price of
the goods because the ownership
has not transferred to the buyer.
 DOCTRINE OF CAVEAT EMPTOR
The expression ‘Caveat Emptor’ meaning ‘Let the
buyer beware’ The doctrine of caveat emptor has been
given in the first para of Sec-16.
‘Subject to the provision of this act & other law for the
time being in force there is no implied warranty or
condition as to the quality or fitness for any particular
purpose of goods supplied under a contract of sale.
In the other words it is not part of the seller’s duty to
point out defect of the goods which he offers for sale
rather it is the duty of the buyer to satisfy himself about
the quality as well as the suitability of the goods.
Eg: H bought oats from S a sample of which
had been shown to H. H erroneously thought
that the oats were old. The oats were however
new, Held , H would not avoid contract.
EXCEPTIONS TO THE DOCTRINE OF
CAVEAT EMPTOR.
(1) In case of Misrepresentation by the seller.
(2) In case of concealment of latent defect(Which
would not be discovered on a reasonable
examination).
(3) In case of sale by description(Sec-15).
(4) In case of sale by sample (Sec-17).
(5) In case of sale by sample as well as
description(Sec-15)
(6) Fitness for a particular purpose {Sec-16(1)}
(7) Merchantable Quality {Sec-16(2)}
 Relevance of Caveat Emptor
The rule of Caveat Emptor appeared to play an
important role in the past when trade was conducted on
local scale & the buyer had very opportunity to examine
the goods before buying. However in the modern
context the relevance of the rule have been mitigated
because of global dimensions of trade government
legislation, Consumer Protection professional
management intense competition and consumer
awareness .
In fact the rule of caveat emptor should be replaced by
the rule of ‘Caveat Vendor’ ‘Let the seller beware’
 CONDITIONS & WARRANTY
It is usual for both seller and buyer to make representation
to each other at the time of entering into a contract of sale.
Some of these representations are mere opinions which do
not form a part of contract of sale. Where as some of them
may become a part of contract of sale.
Representations which become a part of contract of sale are
termed as stipulation which may rank as condition and
warranty. Eg: mere commendation of his goods by the
seller does not become a stipulation and gives no rights to
action to the buyer against the seller as such. Representation
are mere opinion on the part of the seller.
Meaning of stipulation {Sec-12(1)}:
A stipulation in a contract of sale of goods may be a condition
or warranty.
Meaning of Condition {(Sec-12(2)}:
A condition is a stipulation:
(a) Which is essential to the main purpose of the contract and
(b) the breach of which gives the aggrieved party a right to
terminate the contract.
Eg: X asked a car dealer to suggest him a car suitable for
touring purpose the dealer suggested a “ Buggati Car”.
Accordingly , X purchased it but found it unsuiatble for
touring purpose. In this case suitability of car for touring
purpose was a condition of contract . X was therefore
entitled to reject the car have refund of the price paid.
Meaning of Warranty {Sec-12(3)}:
(a) Which is collateral to the main purpose of the
contract and.
(b) the breach of which gives the aggrieved party a
right to claim damages but not a right to reject goods
and to terminate the contract.
Eg: X asked a car dealer to suggest him a good car
and while suggesting the car the dealer said that it
could run for 20Km/Ltr. of petrol. But the car could
run only 10Km/Ltr of petrol. In this case the
statement made by the seller was a warranty X was
therefore not entitled to reject the car. But he was
entitled to claim the damages.
 Distinction B/w Condition &
Warranty
Basis Condition Warranty

Essential Vs.Collateral It is a stipulation which is It is stipulation which is only

essential to the main collateral to the main purpose
purpose of the contract . of the contract.

Right in case of breach The aggrieved party can The aggrieved party can
terminate the contract. claim damages but can not
terminate contract.

Treatment A breach of condition be A breach of warranty cannot

treated as a breach of be treated as a breach of
warranty. For a buyer may condition.
like to retain the goods
and claim only damages.
 SALE / TRANSFER OF TITLE BY NON-
OWNERS
Meaning of General Rule:
The general rule is expressed by the latin maxim
“Namo dat quod non habit” Which means that “No
one can give what he does not himself possess.” If the
seller’s title to the goods is defective the buyer’s title
will also be defective because the buyer acquires his
title to the goods from the seller. Hence the seller cannot
give a better title to the buyer than he himself has.
Eg: X stole a TV and delivered it to Y, an auctioneer Y
sold the TV to Z at auction. It was held that Z obtained
no title to the TV because X had no title to it.
 EXCEPTION TO THE GENERAL
RULE
The circumstances under which a seller can give a better title than
what he himself has.
1) Sale by a mercantile agent(Sec-27).
2) Sale by one of joint owners (Sec-28).
3) Sale by person in possession under voidable contract (Sec-29).
4) Sale by buyer in possession before transfer of ownership{Sec-
30(2)}.
5) Sale by an unpaid seller{(Sec-54(3)}.
6) Sale by a pawnee or pledgee.
7) Sale by official receiver or assignee.
8) Sale by owner by estoppel.
 EXCEPTION IN OTHER ACT.
(a) Sale by a finder of lost goods under
circumstances (Sec-169).
(b) Sale by a pawnee or pledgee under certain
circumstances (Sec-176).
(c) Sale by an official receiver or official assignee or
liquidator of a company.
In all the above cases if the seller even though he is
not the owner of the goods, sells the goods the buyer
gets a goods title.
PERFORMANCE OF CONTRACT
Performance of a contract of sales means as
regards the seller, delivery of the goods to the
buyer and as regards the buyer, acceptance of the
delivery of the goods and payment for them in
accordance with the terms of the contract of
sale(Sec-31)
Meaning of Delivery{Sec-2(2)}:
Delivery means the voluntary transfer of
possession from one person to another.
 TYPES OF DELIVERY

(a) Actual Delivery.

(b) Symbolic Delivery.

(c) Constructive Delivery.

RIGHTS AND DUTIES OF BUYER

1) Right to have delivery as per contract (Sec-

31,32)

2) Right to reject the goods(Sec-37).

3) Right to repudiate {Sec-38(1)}.

4) Right to notice of insurance(Sec-39)

5) Right to examine (Sec-41)

 DUTIES OF THE BUYER
(1) Duty to accept the goods and pay for them in exchange for
possession(Sec-31,32).
(2) Duty to apply for delivery (Sec-35).
(3) Duty to demand delivery at a reasonable hour{Sec36(4)}.
(4) Duty to accept instalment delivery and pay for it {Sec-
38(2)}.s
(5) Duty to take risk of deterioration in the course of transit (Sec-
40).
(6) Duty to intimate the seller where he rejects the goods(Sec-43).
(7) Duty to take delivery(Sec-44)
(8) Duty to pay price(Sec-55)
(9) Duty to pay damages for non-acceptance(Sec-56).
 UNPAID SELLER AND HIS
RIGHTS
Meaning of an Unpaid seller {Sec-45(1)(2)}:
(a) The whole of the price has not been paid or
tendered.
(b) A bill of exchange or other negotiable
instrument has been received as a conditional
payment and the condition on which it was
received has not been fulfilled by reason of
dishonour of the instrument or otherwise.
The following condition must be fulfilled
before a seller of goods can be deemed to
be an unpaid seller:
(a) He must be unpaid and the price must be due.

(b) He must have an immediate right of action for

the price.

(c) A Bill of Exchange or the negotiable instrument

was received but the same has been dishonoured.
When the payment is made by a negotiable
instrument it is usually a conditional payment the
condition being that the instrument shall be duly
honoured. If the instrument is not honoured the
seller is deemed to be an “Unpaid Seller”.
Eg: X sold some goods to Y for Rs. 10000. Y
paid Rs.99000 but failed to pay the balance.
Eg: X sold some goods to Y for Rs.10000 and
received a cheque for the full price as
conditional payment. On presentment the
cheque was dishonoured by the bank.
RIGHTS OF AN UNPAID SELLER

Against Against the Buyer

Goods Personally

Seller’s Suits:
Where the Property Where the property Suit for Price {Sec-
in goods has passed to in goods has not 55(1)}.
the buyer {Sec46(1)} passed to the buyer. Suit for Damages for
non-acceptance
Right of Lien.(Sec-47, With holding {Sec (Sec-56).
48, 49). Suit for interest
46(2)}
Right of Stoppage in {Sec-61(2)}
transit {Sec-46(1)(b) & Lien. Suit for Damages
50 to 52} for repudiation of
Stoppage in transit.
Right of resale. {Sec- the contract (Sec-60)
46(1)(c) & 54} Resale .
 REMEDIES FOR BREACH OF
CONTRACT OF SALE
Buyer’s Suits:
(a) Suit for damages for non delivery of the
goods (Sec-57).
(b) Suit for specific performance(Sec-58).
(c) Suit for breach of warranty(Sec-59).
(d) Suit for damages for repudiation of
contract by the seller before due date(Sec-
60)
(e) Suit for interest {Sec-61(2)(b)}.