Sale of Goods Act, 1930

-Swara Apradh
Vanshika Narsinghani
Sejal Saste
Shriya Agalgaonkar
Essentials elements of a Contract of
Sale
The following six features are essential elements of any contract of sale of
goods.
1. Two Parties: A contract of sale of goods is bilateral in nature wherein
property in the goods has to pass from one party to another. One cannot
buy one’s own goods.
For example, A is the owner of a grocery shop. If he supplies the goods
(from the stock meant for sale) to his family, it does not amount to a sale
and there is no contract of sale. This is so because the seller and buyer must
be two different parties, as one person cannot be both a seller as well as a
buyer. However, there shall be a contract of sale between part owners.

Suppose A and B jointly own a television set, A may transfer his

ownership in the television set to B, thereby making B the sole owner of
the goods. In the same way, a partner may buy goods from the firm in
which he is a partner, and vice-versa.
However, there is an exception against the general rule that no person can
buy his own goods. Where a pawnee sells the goods pledged with him/her
on non-payment of his/her money, the pawnor may buy them in execution
of a decree.
2. Goods: The subject matter of a contract of sale must be goods. Every kind of
movable property except actionable claims and money is regarded as ‘goods’.
Contracts relating to services are not considered as contract of sale. Immovable
property is governed by a separate statute, ‘Transfer of Property Act’.
3. Transfer of ownership: Transfer of property in goods is also integral to a
contract of sale. The term ‘property in goods’ means the ownership of the goods.
In every contract of sale, there should be an agreement between the buyer and
the seller for transfer of ownership. Here property means the general property in
goods, and not merely a special property.
Thus, it is the general property, which is transferred under a contract of sale as
distinguished from special property, which is transferred in case of pledge of
goods, i.e., possession of goods is transferred to the pledgee or pawnee while the
ownership rights remain with the pledger. Thus, in a contract of sale there must
be an absolute transfer of the ownership. It must be noted that the physical
delivery of goods is not essential for transferring the ownership .
4. Price: The buyer must pay some price for goods. The term ‘price’ is ‘the
money consideration for a sale of goods’. Accordingly, consideration in a
contract of sale has necessarily to be in money. Where goods are offered as
consideration for goods, it will not amount to sale, but it will be called barter or
exchange, which was prevalent in ancient times.
Similarly, if a person offers the goods to somebody else without consideration, it
amounts to a gift or charity and not sale. In explicit terms, goods must be sold for
a definite amount of money, called the price. However, the consideration can be
partly in money and partly in valued up goods. Furthermore, payment is not
necessary at the time of making the contract of sale.
5. All essentials of a Valid contract: A contract of sale is a special type of
contract, therefore, to be valid, it must have all the essential elements of a
valid contract, viz., free consent, consideration, competency of contracting
parties, lawful object, legal formalities to be completed, etc. A contract of sale
will be invalid if important elements are missing. For instance, if A agreed to
sell his car to B because B forced him to do so by means of undue influence,
this contract of sale is not valid since there is no free consent on the part of
the transferor.
6. Includes both a ‘Sale’ and ‘An Agreement to Sell’: The ‘contract of sale’ is a
generic term and includes both sale and an agreement to sell. The sale is an
executed or absolute contract whereas ‘an agreement to sell’ is an executory
contract and implies a conditional sale.
A contract of sale can be made merely by an offer, to buy or sell goods for a
price, followed by acceptance of such an offer. Interestingly, neither the payment
of price nor the delivery of goods is essential at the time of making the contract
of sale unless otherwise agreed.
Subject to the provisions of the law for time being in force, a contract of sale may
be made either orally or in writing, or partly orally and partly in writing, or may
even be implied from the conduct of the parties.

Condition & 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

•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 render them unmerchantable.
Sale by sample has following three conditions:
(i) Correspondence of Goods with sample in quality [sec 17(2)(a)]
(ii) Reasonable opportunity of comparing goods with the sample [Sec 17(2)(b)]
(iii) Merchantability of Goods [Sec 17(2)(c)]

•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.

A 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.
 Whether a stipulation in a contract of sale is a condition or a warranty
depends in each case on the construction of the contract. A stipulation
may be a condition, though called a warranty in the contract.
Warranties are subsidiary or collateral to the main purpose of the contract. It is
not of vital importance. The main contract can be completed even if warranty is not
fulfilled.

In case of breach of warranty, the buyer cannot put an end to the contract. He can
only claim damages from the seller. A breach of warranty cannot be treated as a
breach of condition.
Doctrine of Caveat Emptor [Sec 16]
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 pigs being
infected cause typhoid to the other healthy pigs of the buyer. The rule of
caveat emptor would apply.
UNPAID SELLER AND HIS RIGHTS
 UNPAID SELLER :
 SELLER: A person who sells the goods or agrees to sell the goods is
called a seller.
 UNPAID: It means payment is not made or without payment. In simple
words, unpaid seller means a person who had sold the goods for a price
but the price has not been paid to him.
 Sales Act defines the unpaid seller in the following words:
“ Unpaid seller is a person
1. To whom the whole price has not been paid or tendered.
2. And where a bill of exchange or other negotiable instruments have
been accepted by him as a condition on which it was received has not been
fulfilled by reason of dishonor of the instrument or otherwise. “
 Example: Party A sells a car on cash basis to Party B and the price has not
been received yet.
RIGHT AGAINST
•GOODS
Rights of Lien
Seller’s Lien (Section 47)
According to subsection (1) of Section 47 of the Sale of Goods Act, 1930, an unpaid
seller, who is in possession of the goods can retain their possession until payment. This
is possible in the following cases:

1. He sells the goods without any stipulation for credit

2. The goods are sold on credit but the credit term has expired.
3. The buyer becomes insolvent.

• Right of Stoppage in Transit

This right is an extension to the right of lien. The right of stoppage in transit means that
an unpaid seller has the right to stop the goods while they are in transit, regain
possession, and retain them till he receives the full price.
If an unpaid seller has parted with the possession of the goods and the buyer becomes
insolvent, then the seller can ask the carrier to return the goods back. This is subject to
the provisions of the Act.

• Right of Resale (Section 54)

The right of resale is an important right for an unpaid seller. If he does not have this
right, then the right of lien and stoppage won’t make sense. An unpaid seller can
exercise his right of resale under the following conditions:
1. Goods are perishable in nature
2. Seller gives a notice to the buyer of his intention of resale
3. Unpaid seller resells the goods post exercising his right of Lien or stoppage
4. Resale where the right of resale is reserved in the contract of sale
5. Property in the goods has not passed to the buyer.

When the property in goods has not been transferred

RIGHT OF WITHHOLDING DELIVERY

If the property in the goods has not passed to the buyer, the unpaid seller cannot exercise right
of lien ,but gets a right of withholding the delivery of goods, similar to and co-extensive with
lien.
Rights against the buyer personally There are some rights which an unpaid seller may enforce
against the buyer personally. These rights are called RIGHTS IN PERSONAM.

SUIT FOR PRICE[Sec. 55]

Where ownership of the goods has passed to the buyer and the buyer refuses to pay the price
according to the terms
of the contract, the seller can sue the buyer for price, irrespective of delivery of the goods.
(Sec. 55)
SUIT FOR DAMAGES FOR NON-DELIVERY[Sec.56]

Where the buyer refuses to accept and pay for the goods, the seller may sue him for damages f
non acceptance. The seller
can recover damages only and not the full price (Sec. 56)

SUIT FOR SPECIAL DAMAGES AND INTEREST

[Sec.61]

The seller can sue the buyer for special damages where the parties are aware of such damages
the time of contract. The
unpaid seller can recover interest at a reasonable rate on the total unpaid price of goods, from t
time it was due until
it is paid.
(Sec. 61)
Performance of Contract of Sale
There are many rules and definitions governing the law on sales in sections 31 to 40
of the Sale of Goods Act, 1930. In this article, we will be looking at various
definitions and duties of buyers, sellers, and third parties.
A sale of goods contract is automatically created whenever a good or product is sold. The
resulting contract imposes the duties that are required of both parties involved:

• The seller. : Delivers goods and receives consideration.

• Buyer: Accepts and pays for the goods.

The performance of a contract is a simple transaction where the seller

delivers the goods and the buyer pays. If there is something more
complex, then this is stated in the contract as special terms.

Delivery of Goods
The rules regarding the delivery of goods are contained in Sec.33 to Sec. 39 of the Sale
of Goods Act, which may be grouped as under:

Delivery of goods may be defined as a voluntary transfer of possession of goods from the
seller to the buyer.