Sale of Goods Act 1930

Lecture 5, 6 & 7
 Contract for Sale of Goods
• A contract of sale of goods is a contract whereby the seller
transfers the property to the buyer for a price.
– There are two parties: buyer and seller. However there can
be a contract for sale of goods between two part owner in
case of joint ownership, where one owner sells his part of
property to the other owner.
– To constitute a contract for sale of goods, the seller must
agree to transfer his ownership in goods to the buyer. It
distinguishes the contract for sale of goods from rent.
– The contract is for goods not for any immoveable property.
Goods means every kind of moveable property other than
actionable claim or money. Any property attached to the
earth but agreed to be severed before the sale is also
included in the definition of goods. Such as growing crops,
fruits hanging in a tree, standing timber etc.
 Contract for Sale of Goods (contd)
– The contract may be made for existing goods owned by
the seller or any future goods which the seller may
acquire. Such acquisition of ownership by the seller may
depend on some contingencies.
– There must be a price to be paid by the buyer in
exchange of the goods. Price can be in cash or in kind. It
may be fixed in the contract or to be fixed subsequently
in an agreed manner.
– Contract for sale of goods includes contract to sell and
contract for agreement to sale.
– no particular form is required to make a contract for sale
of goods. It can be oral or written, expressed or implied.
 Sale and Agreement to sell
• When under a contract of sale, the property in
the goods is transferred from the seller to the
buyer, the contract is a sale.
• Where under a contract of sale, the transfer of
the property in goods is to take place at some
future date, or subject to some conditions to
be fulfilled, the contract is called an
agreement to sell.
 Sale
• Ownership of the goods passes
immediately to the buyer.
• It is an executed contract
• By way of sale, the buyer gets the
right over the property
enforceable against all
• The buyer bears the risks of loss
and damage to the property.
• The seller can claim price from the
buyer.
• If seller resells the goods to 3rd
party, the buyer can claim the
goods from 3rd party.
• For bankruptcy of buyer, the seller
can claim unpaid price; in case of
bankruptcy of seller, the buyer can
claim the goods if in possession of
the seller
Agreement to sell
• Ownership passes at future time
• It is an executory contract
• By agreement to sell, buyer gets
right only to be enforced against the
seller, because for the public, seller
is still the owner of the property
• The seller bears the risks of loss and
damage to the property.
• The seller cannot claim price from
the buyer but he can claim damages
for refusal to buy the goods.
• In case of resale by the seller, the
buyer can only claim damages from
the seller.
• For bankruptcy of buyer, the seller
can retain the goods; in case of
bankruptcy of the seller, the buyer
asks for the paid price
 Conditions and Warranties
• A condition is a stipulation essential to the main
purpose of the contract, the breach of which gives rise
to a right to treat the contract as repudiated.
• A warranties is a stipulation collateral to the main
purpose of the contract, the breach of which gives rise
to a right to claim damages but not a right to repudiate
the contract.
• The buyer wanted to buy a car of 150 cc, preferably to
be white. If the car is less than 150 cc, it is a breach of
condition. If the car is of any other color, that would be
a breach of warranties.
• Because the determining criteria of the wanted car was
its engine capacity.
 Conditions Warranties
• It is an essential stipulation. • It is a collateral stipulation.
• In case of breach, the • In case of breach, the
aggrieved party can aggrieved party can claim
terminate the contract. for damages.
• Breach of condition can be • Breach of warranties cannot
treated as breach of be treated as breach of
warranties conditions.
Breach of condition can be treated as breach of warranties in following cases:
(a) Voluntary waiver of a condition: when the seller breaches a condition, the
buyer can waive it as condition and claim damages only. Such case is called
voluntary waiver of a condition.
(b) Compulsory waiver of a condition: when the contract of sale is indivisible
and the buyer accepts the goods or a part thereof, subsequently he comes to
know about the breach of condition by the seller, he cannot repudiate the
contract but can claim damages. In this case, the law presumes a waiver and
creates estoppel against the buyer
 Express and Implied
• A stipulation in a contract can be expressed or
implied.
• A stipulation is said to be expressed when it is written
in the contract.
• Implied stipulations are presumed by law though they
have not been mentioned expressly in the contract
• Section 14 to 17 of the Sale of Goods Act 1930
contain the conditions and the warranties which are
implied to a contract for sale of goods.
 Implied conditions
1) Condition as to ownership (sec 14): in a contract of sale of goods, there is an
implied condition on the part of the seller that:
– In case of sale, he has full ownership to sell the goods.
– In case of agreement to sell, he will have a right to sell the goods at the time
when the property is to pass.
Rowland vs. Divall (1923): Rowland bought a car from Divall. Four months
later, it was found out that Divall did not have the ownership to sell the car and
the real owner took the car from Rowland. Rowland was entitled to recover the
full price from Divall even though he used the car for four months.

2. Condition as to description (sec 15): in a contract for sale of goods by

description, there is an implied condition that goods shall correspond to the
given description in terms of quality and characteristics of the goods.
Andrews Bros vs. Singer & Co. (1934): the buyer contracted for new cars. After
delivery, he found one reconditioned car. He was entitled to reject the car and
get a replacement by a new car.
 Implied conditions (contd)
3. Condition as to sample (sec 17): in a contract for sale of goods by sample,
there is an implied condition that:
(a) the bulk shall correspond to the sample in terms of quality.
(b) the buyer shall have reasonable opportunity of comparing the bulk with
the sample.
(c) the goods shall be free from any defect which renders them un-
merchantable which would not be apparent on reasonable examination of
the sample.
Lorymer vs. Smith: two parcels of wheat was purchased by sample. The
buyer inspected one parcel and another parcel was not available for
inspection before delivery. The buyer was entitled to rescind the contract
on the ground of not matching with the sample.
4. Condition as to sample and description (sec 15): in such case, the bulk will
correspond with the both sample and description.
Nichol vs Godts (1854): Nichol contracted to buy oil as to description and
warranted with sample. The delivered oil was matched with sample but
adulterated with another oil which mismatched with the description. Buyer
was entitled to reject the oil.
 Implied conditions (contd)
5. Condition as to fitness and quality (sec 16 (1) (2) (3):
(a) Condition as fitness: where the buyer informs the seller the particular purpose of
purchase of the goods, the buyer relies on the skill or judgment of seller, and the
goods are of a description which the seller deals with in course of business, there is
an implied condition that the goods will be reasonably fit for the purpose.
Frost vs Aylesbury Dairy co. ltd.: the buyer bought milk for his family. Milk was
contaminated with typhoid germs and buyer’s wife died from typhoid. The buyer was
entitled for damages because the seller knew this was for human consumption and
the goods was un-fit for this purpose.
(b) Condition as merchantability quality: merchantable quality means the goods are of
such quality and in such condition that a reasonble man acting reasonably would
accept them under the circumstances of the case. Where the goods was bought by
description and the seller deals with the goods of this description, there is an implied
condition that goods are of merchantable quality.
Morelli vs. Fitch Gibbons (1928): buyer ordered a bottle of wine of a particular brand.
At the time of opening the cork, the bottle broke and caused injury. The sale was held
by description and the bottle was held un-merchantable. Buyer was entitled to
damages from the seller.
(b) Usage of trade: An implied condition as to fitness or quality for a particular purpose
may be annexed to a contract for sale by usage of trade.
 Implied warranties
1. Warranties of quite possession (sec 14 (b): there is an implied
warranty that the buyer shall have and enjoy quite possession of the
goods. Breach of this occurs from the defective title of the seller.
Therefore this may be regarded as an extension of implied condition
of ownership.
2. Warranty against charges (sec 14 (c): there is an implied warranty
that the goods shall be free from any charges and encumbrances. A
pledges his watch with B but sold the watch to C without informing
and discharging the pledge. B informs C. C can claim damages from
A.
3. Warranty from usage of trade: An implied warranty as to fitness or
quality for a particular purpose may be annexed to a contract for
sale by usage of trade.
Any implied condition or warranty can be removed or varied by express
condition or warranty in the contract or by the course of dealing
between the parties or by usage.
 Transfer of ownership
• The precise moment of transfer of ownership is
required to be determined:
– Risk follows ownership. So where goods are lost or
damaged, the owner is entitled to damages.
– The owner bears the risk. So if any damage is caused
to 3rd party, the owner is liable to pay damages.
– In case of bankruptcy, the goods can be taken for
settlement of debts of the owner.
– Whether the seller can sue for price depends on
whether the buyer has become the owner or not.
 Passing of ownership
• For specific or ascertained goods: specific goods means gods
indentified and agreed at the time of making the contract.
• For unascertained goods: ownership will not pass until the
goods have bee ascertained. A contracted to buy 1 ton rice from
B. B has 5 ton rice at his warehouse. A will not become the
owner until 1 ton rice has been separated for A from this 5 ton.
• Ownership passes when the parties intend it to pass. The parties
may intend it to pass at once, or at payment or at delivery of
goods. Such intention can be derived from:
– the terms of contract,
– the circumstances and
– the conduct of the parties
• When the intention of the parties cannot be determined,
section 20-24 state when the ownership passes.
 Passing of ownership (contd)
• When the goods are at deliverable state, the ownership passes at the
moment of completion of contract. The goods are said to be at deliverable
state when the buyer would under the contract be bound to take delivery of
them. E.g. the buyer bought a bicycle from the shop and bicycle is ready for
delivery.
• When the goods is to be put in deliverable state, i.e. the seller needs to do
something from his part to make the goods deliverable, the ownership passes
when goods become deliverable and the buyer has been notified about this.
Philiph Head & Sons Ltd. Vs. Showfronts Ltd.: A sold a carpet to B which was
required to be placed at B’s house. A delivered the carpet to B’s house but it
was stolen before placement. It was held that the ownership did not pass and
the seller was liable to deliver another carpet to buyer.
• When the goods are at deliverable state but need to be measured or
weighted, ownership does not pass until same is done and informed the
buyer to take the delivery.
Zagury vs. Furnell: A sold B 289 bales of goat skin each containing 5 dozens. A
was required to measure and count the bales. Before completion, the bales
caught fire. It was held that A remained the owner and carrier the risk.
 Passing of ownership (contd)
• When goods are sent to buyer for approval, the
ownership passes:
– When buyer signifies his intention to keep the goods, or
– When buyer without signifying rejection, keeps the goods
till the period fixed for rejection, if no such time fixed, for
a reasonable period of time
Kirkham vs. Attenborough (1897): A sent a jewelry to B
“on sale or return”. B pledges the jewelry with C. A sued C
for return of the jewelry. The court held that action of B
pledging the jewelry with C constitutes the acceptance of
goods and ownership passed to B. A can claim the price
from B as ownership passed.
 Transfer of ownership by non owner
• The general rule is Nemo Dat Quad Non Habet no one can
give what he has not. Therefore if the seller does not have
ownership, he cannot transfer the ownership to the buyer.
Followings are the exceptions to this:
– Where the mercantile agent is in possession of the goods and he
sells the same, the bonafide buyer for value without noitce
receives a good ownership
– Where the owner by words or action lets the buyer believe the
seller to be true owner and the buyer purchases the goods from
the seller, the owner cannot deny the seller’s authority to sell
and subsequent transfer of ownership.
– Where a joint owner is in possession of the goods with the
permission of other owners, if he sells the goods to a bonafide
buyer for value without notice, the buyer receives good
ownership even though the other owners does not permit.
Transfer of ownership by non owner (contd)
– When a seller is in possession of the goods under a
voidable contract and he sells the goods to a bonafide
buyer for value without notice before the termination of
the contract, the buyer remains the owner.
– The seller remains in possession of goods even after the
transfer of ownership to buyer. The seller resells the goods
to another bonafide buyer for value without knowledge.
The new buyer receives good ownership.
– When the buyer is in possession of goods with the consent
of the seller before transfer of ownership to him and he
sells the goods to a bonafide buyer for value without
knowledge, The new buyer receives good ownership.
– The unpaid seller resells the goods to 3rd party. The 3rd party
receives good ownership.
 Duties of buyer and seller
• It is the duty of the seller to deliver the goods to the
buyer and the buyer is required to pay the price
according to the contract.
• Payment and delivery of goods are concurrent condition.
The seller should be ready to deliver the possession upon
payment and the buyer should also be ready to pay the
price in exchange of possession of the goods.
• Delivery of goods can be actual or constructive. Similarly,
payment can be made in cash or kind or in form of any
negotiable instruments.
 Caveat Emptor
It is the duty of the buyer to be careful while purchasing goods of his
requirement and in absence of any enquiry from the buyer, the seller
is not bound to disclose every defect in the goods of which he may be
cognizant. The buyer must examine the goods thoroughly and must
see that the foods he buys are suitable for the purpose for which he
wants them. If the goods turn out to be defective or do not suit his
purpose, the buyer cannot hold the seller liable for the same as there
is no implied undertaking by the seller that he shall supply such
goods as suit the buyer’s purpose. If therefore, while making the
purchases of goods, the buyer depends on his own skill and makes a
bad choice, he must curse himself for his own fault in the absence of
misrepresentation or fraud or guarantee by the seller.
For instance, A purchased a horse from B for the purpose of race, but
he did not mention this. Subsequently, the horse was found suitable
for riding but not for race. A cannot reject the horse or claim
compensation on the ground of caveat emptor rule.
 Exceptions to Caveat Emptor
• The seller makes a misrepresentation and buyer relies on it.
• The seller makes fraudulent statement and buyer relies on it.
• The seller conceals any defect of the goods which the buyer cannot
discovered by reasonable means.
• The goods were purchased on description but they do not correspond
with the description.
• When the goods were purchased on description and seller deals with
these goods in regular business, the goods are not merchantable quality
• The goods are bought on sample and the bulk does not match with the
sample. The buyer did not have opportunity to check. There was any
latent defect which cannot be discovered by checking.
• The goods were bought by description and sample and they did not
match with both description and sample.
• Buyer informed his purpose and relied on seller’s skill but the goods
were found unfit for the purpose.
• The seller deviates from any trade usage
 Remedy for unpaid seller
• Unpaid seller means a seller:
– who has not received the price in part or full .
– Who received price by way of negotiable instruments as conditional payment
and the condition was not fulfilled by reason of dishonor of the instrument.
• As against goods:
– Seller’s lien: the unpaid seller can retain the goods if he is still in possession in
following cases:
• The goods was not sold in credit.
• If sold in credit, the term of credit has expired.
• The buyer becomes bankrupt.
– Right to stop in transit: if buyer becomes bankrupt and seller put the goods in
transit for delivery, he may stop them in transit and retain the possession till
payment.
– Limited right to resale: in above two cases, the seller can resell the goods , the
seller can resell the goods if:
• The goods are perishable in nature.
• The seller gives notice to buyer with intention to resale and buyer failed to pay within
reasonable time.
 Remedy for unpaid seller (contd)
• As against the buyer personally:
– Suit for price: in case of sale, where the buyer
refuses or wrongfully neglects to pay, the seller
may sue the buyer for price.
– Suit for damages for non acceptance: where the
buyer wrongfully accepts the goods and pay the
price, the seller can sue for damages for non
acceptance of goods.
– Suit for interest and special damage the seller may
recover interest or special damages where by law,
interest or special damages may be recoverable.
 Remedy for buyer

• Suit for damages for non delivery: when the seller wrongfully
neglects to deliver the goods to the buyer.
• Suit for specific performance: where there is a breach of contract
for the sale of specific of ascertained goods, the buyer may file a
suit for specific performance of contract.
• Suit for rescission of contract and for damages: where there is
breach of condition.
• Sit for damages for breach of warranty: when there is a breach of
warranty or when a breach of condition is treated as breach of
warranty.
• Suit for recovery of price with interest: when the buyer already
paid for the price but the seller did not deliver the foods, the
buyer can sue for the paid price as well as for interest at
reasonable rate.