Sale of Goods Act 1930

Definition
• It is a contract by which the ownership of movable goods is
transferred from the seller to the buyer.
• The term ‘contract of sale’ is defined in Section 4(1) of the Sale of
Goods Act as- “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”
Essentials of a Contract of Sale
• (i) All requirements of a valid contract must be fulfilled
• (ii) Two Parties
• (iii) Goods
• (iv) Transfer of Property
• (v) Price
• (vi) Includes both a ‘sale’ and ‘agreement to sale
Goods
• The subject matter of a contract of sale of goods is goods. According
to Sec 2(7) “goods means 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 or under contract of sale.
• ACTIONABLE CLAIM – ‘means a claim which can be enforced through
the court of law e.g. a debt due from one person to another is an
actionable claim.
Examples of Goods
• Goodwill, Trade Mark, Copyright, Patent right, Water, Gas &
Electricity, are all example of goods.
• Classification of Goods:-
• (i) Existing Goods
• (ii) Specific goods
• (iii)unascertained goods
• (iv) Future Goods- This is applicable to goods which are subject matter
of the agreement to sale
• (v) Contingent Goods- i.e. the goods arriving by ships etc.
Sale & Agreement to sale
• SALE: It is a contract where the ownership in the goods is transferred by seller to
the buyer immediately at the conclusion contract.
• EXAMPLE: A sells his house to B for Rs. 10,00,000. It is a sale since the ownership
of the house has been transferred from A to B.
• AGREEMENT TO SELL: It is a contract of sale where the transfer of property in
goods is to take place at a future date or subject to some condition thereafter to
be fulfilled.
EXAMPLE: A agreed to buy from B a certain quantity of nitrate of soda. The ship
carrying the nitrate of soda was yet to arrive. This is `an agreement to sale`. In this
case, the ownership of nitrate of soda is to be to transferred to A on the arrival of
the ship containing the specified goods (i.e. nitrate of soda) [Johnson V McDonald
(1842) 9 M & W 600, 60 RR 838] 5
Sale & Agreement to sell Differences
Stipulation, Condition & Warranty
• A representation which forms part of the contract of sale and affects
the contract, is called a stipulation.
• A stipulation which is most important for formation of the contract of
sale is known as a ‘condition’.
• A stipulation which is collateral or of least importance for the
formation of the contract of sale, is known as a ‘warranty’.
Conditions
• Section 12(2) of the Sale of Goods Act, 1930 defines condition as, “a
condition is a stipulation essential to the main purpose of the
contract, the breach of which gives rise to right to treat the contract
as repudiated. "Example: Buyer wanted a horse which could run at a
speed of 45 m.p.h.
Implied Conditions
• (i) Condition as to Title [Sec 14(a)]
• (ii) Condition as to Description [Sec 15]
• (iii) Condition as to Sample [Sec 17(2)]
• (iv) Condition as to Sample as well as Description [Sec 15]
• (v) Condition as to Quality or Fitness for Buyer’s purpose [Section
16(1)]
• (vi) Condition as to Merchantability [Section 16(2)]
• (vii)Condition as to Wholesomeness
Cont.
• Condition as to Title [Sec 14(a)]:- It is the most important implied condition in a contract
of sale that seller has the right to sell the goods.

• Condition as to Description [Sec 15] Whenever the goods are sold by description, the
implied condition is that the goods shall correspond with the description. ’
• Condition as to Sample:- In a sale by sample there is a implied condition that the goods
shall correspond with the sample in quality, and the goods shall be free from the defects
which makes the goods un-merchantable .
• Sale by sample has following three conditions:
• (i) Correspondence of Goods with sample in quality [sec17(2)(a)]
• (ii) Reasonable opportunity of comparing goods with the sample [Sec 17(2)(b)](iii)
Merchantability of Goods [Sec 17(2)(c)]
Cont.
• Condition as to Sample as well as Description[Sec 15]:- Sometimes,
the seller shows sample to the buyer and also gives him description.
In such case, the implied condition is that the goods shall correspond
with both, the sample as well description.
• Condition as to Merchantability [Section 16(2)]:-The term
merchantability means two things:
• (i) If goods are purchased for resale, they should be immediately re-
saleable; &
• (ii) If goods are purchased for self use then they should be reasonably
fit for the purpose for which they are generally used.
Doctrine of Caveat Emptor
• The doctrine of caveat emptor is a fundamental principle of law of
sale of goods. It means ‘Caution Buyer’ i.e. ‘let the buyer beware’.
• In other words, it is no part of the seller’s duty to point out defects in
his own goods. The buyer must inspect the goods to find out if they
will suit his purpose e.g. certain pigs are sold ‘subject to all faults’.
These goats being infected cause typhoid to the other healthy goats
of the buyer. The rule of caveat emptor would apply.
Exceptions to the Doctrine of Caveat
Emptor
• (i) Condition as to Quality or Fitness for Buyer’s purpose
• (ii) Where the seller makes a false representation or obtains consent
of the buyer by fraud
• (iii) Condition as to Merchantability
• (iv) Condition as to Wholesomeness
• (v) Condition implied by the Custom or Trade Usage