The Sale of Goods Act, 1930

MATTER IS FOR REFERNCE ONLY

Provisions Section

General Principles of Law of Contract 1 to 75

Contract relating to Sale of Goods 76 to 124

Special kinds of Contracts (includes indemnity, 125 to 238

guarantee, bailment & pledge)

Contracts relating to Partnership 239 to 266

 At present the Indian Contract Act
includes

Provisions Section
General Principles of Law of Contract 1 to 75
Special kinds of Contracts (includes 125 to 238
indemnity, guarantee, bailment &
pledge)
Definition [Sec.4] “A contract of sale of goods is a contract
whereby the seller transfers or agrees to transfer the property in
goods to buyer for price ”.

Essentials
1. At least two parties
2. Transfer or agreement to transfer ownership of goods
3. Subject matter of contract must necessarily be ‘goods’
4. The consideration is price
5. Contract may be absolute or conditional
6. All other essential of contract must be present (like free
consent, capacity of parties, legal object, offer and acceptance
etc.)
Subject Matter of Contract of
Sale 
The subject matter of a sale under section 6 of the Sale of Goods Act,
1930 can only be goods.
According to section 2(7) of the Sale of goods act 1930, every moveable property other
than actionable claims and money is considered as good. An actionable claim is
something that a person cannot use or enjoy but which can be recovered by him through
a suit or an action in a court of law, for example, a debt due to a person from another.

Stocks, shares, growing crops(separated), goodwill, trademark, patent, copyright,

ancient/rare coins all can be termed as goods except immovable property.
Types of goods

Section 6 sale of goods act bifurcates goods into 3 types: existing goods; future
goods; contingent goods.
Existing goods
At the time of making the contract, ownership or possession of the goods is under the
authority of the seller and after fulfilling the obligations of the contract seller has all
legal rights to transfer the ownership or possession of those goods to buyer, those
goods are known as existing goods under section 6 of the sale of goods act. Existing
goods may be classified as:

A) Ascertained Goods -
Goods are said to be ascertained when out of the mass of unascertained goods, the quantity extracted for the
identified and set aside for a given contract. Thus, when part of the goods lying in bulk are identified and
earmarked for sale, such goods are termed as ascertained goods.
For instance, A enters into an agreement with B to sell a car, at that time A was
having 5 similar-looking cars, when B specifically chooses a car of a particular type
from an unascertained lot of 5 cars, then the selected car will be considered as
ascertained goods.
B) Unascertained Goods -
These are the goods which are not identified and agreed upon the time when a contract of sale is made e.g. goods
in stock or lying in lots.

C) Specific Goods (Section 2(14)) -

These are the goods which are identified and agreed upon at the time when the contract of sale is made.

Future goods
The goods which are made or acquired or produced on demand of the buyer and does not exist at the time of
making the contract are known as future goods. These types of goods are not a contract of sale but an
agreement to sale because the essential condition of the existence of goods is not fulfilled and the seller cannot
transfer what is not yet produced.

Contingent goods
These goods are the type of future goods, the acquisition of which by the seller is dependent on a contingent
event that may or may not happen. The contract is not a sale but an agreement to sell. For instance, when A
proposes to sell his car to B if and only if A’s brother returns from England and return his car.
Sale and Agreement to sell
Sale
– When the ownership in goods is transferred from seller to buyer, its ‘Sale’.
– Its an Executed contract.
• Agreement to Sell
– Transfer of ownership is to take place in future
– Its Executory Contract
Sale Vs. Agreement to Sell
BASIS FOR COMPARISON SALE
Meaning When in a contract of sale,
the exchange of goods for
money consideration takes
place immediately, it is
known as Sale.
Nature Absolute
Type of Contract Executed Contract
Transfer of risk Yes
Title In sale, the title of goods
transfers to the buyer with
the transfer of goods.
AGREEMENT TO SELL
When in a contract of sale
the parties to contract
agree to exchange the
goods for a price at a
future specified date is
known as an Agreement to
Sell.
Conditional
Executory Contract
No
In an agreement to sell,
the title of goods remains
with the seller as there is
no transfer of goods.
BASIS FOR Sale AGREEMENT TO
COMPARISON SELL

Suit for breach of The buyer can Here the buyer has
contract by the claim damages the right to claim
seller from the seller and damages only.
proprietary
remedy from the
party to whom the
goods are sold.

Right of unpaid Right to sue for the Right to sue for

seller price. damages.
What is Hire Purchase Agreements?

Hire purchase is an arrangement made while buying expensive goods. The consumer makes a
downpayment during the purchase, and the outstanding balance will be paid in instalments with an 
interest charge.

Though the concept of hire purchase is not very prevalent in India, there is a similar concept called a
mortgage. Usually, mortgage involves pledging an item previously owned by the borrower in order to fetch
some spending money, and the ownership of the item will be transferred to the lender as long as they repay
the debt. In hire purchase, the borrower purchase a new item.

In both cases, the ownership of the purchased goods will be transferred to the lender until the borrower
pays off the whole debt.
Merits of Hire Purchase

•Companies from sectors, such as plant hire, road freight, construction, manufacturing, transport, and
engineering, which are short of working capital can deploy assets and machinery on hire purchase.
•The return on capital employed (ROCE) and return on assets (ROA) of a company can flatter with a hire
purchase agreement.

Demerits of Hire Purchase

•They can turn out very expensive in the long run because a huge sum goes out as interest payment.
•For businesses, hire purchase means added administrative complexity.
•The notion of instalment payments can make individuals and companies purchase beyond necessity.
•A very high-interest rate may be associated with the agreement, which may not be stated explicitly.
Concept of Condition and Warranty
under the Sale of Goods Act
Under the Sale of Goods Act, 1930 a condition can be understood as
a stipulation which is essential to the main purpose of the contract,
the breach of which gives right to repudiate (reject) the contract and
to claim damages. On the contrary, a warranty can be understood as
stipulation collateral to the main purpose of the contract, the breach
of which does not allow a person to repudiate the contract and only
damages can be claimed.
The term condition is defined in section 12 (2) of the Indian Sale of Goods, Act 1930 whereas
warranty is defined in section 12 (3).
Example of Condition

For example, Sohan wants to purchase a horse from Ravi, which can run at a speed of 50 km per
hour. Ravi shows a horse and says that this horse is well suited for you. Sohan buys the horse. Later
on, he finds that the horse can run only at a speed of 30 km/hour. This is the breach of condition as
the requirement of the buyer is not fulfilled. 

Karan asks a dealer to supply him a shirt that would not shrink after use and wash. The dealer
supplies a shirt which shrinks after use and wash. Karan can reject the shirt or keep the shirt and
claim damages. Here the stipulation to supply a shirt which would not shrink after use and wash is a
condition.
Now if Karan buys a particular shirt which is warranted by the dealer to be one which would not
shrink after use and wash and the shirt does shrink after use and wash, Karan’s only remedy is to
claim damages.
DIFFERENCES BETWEEN CONDITION AND WARRANTY:
CONDITION
Condition is essential to the
main purpose of the
contract.
A breach of condition may
be treated as a breach of
warranty.
Under the stipulation of
condition, the aggrieved
party can repudiate the
contract or claim damages or
both.
WARRANTY
Warranty is just a collateral
to the main purpose of the
contract.
A breach of warranty cannot
be treated as a breach of
condition.
Under the stipulation of
warranty, the aggrieved
party can claim only the
damages and cannot
repudiate the contract.
Breach Of Condition to be treated as
breach of Warranty( S.13)
Under certain circumstances breach of condition is to be treated as a breach of warranty, i,e, the
right to repudiate the contract is deemed to have been lost. These circumstances are:
1. Where a contract of sale is subject to any condition to be fulfilled by the seller,
the buyer may waive the condition or elect to treat the breach of condition as a
breach of warranty and not as a ground for treating the contract as repudiated.
2. Where a contract of sale is not severable and the buyer has accepted the goods
or part thereof, the breach of any condition to be fulfilled by the seller can only be
treated as a breach of warranty and not as a ground for rejecting the goods and
treating the contract as repudiated.
3. Nothing in this section shall affect the case of any condition or warranty
fulfillment of which is excused by law or impossibility or otherwise.
Express and Implied Conditions and
Warranty
Conditions and warranties are said to be express when the terms of the contract expressly
provide for them. They are said to be implied when the law deems their existence in the
contract even without their actually having been put in the contract.
Implied conditions and
Warranties(Section 14 to 17)
The following are the implied conditions:
1. Condition as to Title:
Sec 14(a) provides that there is an implied condition on the part of the seller in
the case of a sale, he has a right to sell the goods and that in case of an
agreement to sell, he will have a right to sell the goods at the time when the
property is to pass. As a consequence of this, if the title turns out to be
defective, the buyer is entitled to reject the goods and claim refund of the price
plus damages. This will be allowed even when the buyer has used the goods.
Example: Rowland v. Divall, (1923) case Rowland bought a car from Divall and
used it for four months. Divall had no title to the car, and consequently Rowland
had to surrender it to the true owner. Rowland sued to recover the total
purchase price he had paid to Divall.
Where the goods are sold by infringing a trade mark, the buyer has the right to
repudiate the transaction on the ground that there was a breach of condition as
to title. [Nilbett v. Confectioners Materials Co Ltd., 1921].
The case of Niblett v Confectioners’ Materials Co, a firm who dealt in confectioners’ materials
agreed in writing to sell condensed milk in tins and of a price including insurance and freight
from New York to London. Payment was made in case on receipt of the shipping documents and
the defendants were paid the price. There were 1,000 cans which bore labels with the word
‘Nissly’ on them. This make Nestle Company notice about it and recommended that this was a
breach of its registered trade mark. The defendants were required to remove the name and brand
in order to be able to sell the goods without being sued by Nestle for infringement of trade mark.
They could only sell them at a loss without any mark.
2. Sale by description (Sec.15):
When there is a contract for the sale of goods by description there is an implied
condition that the goods shall correspond with the description. If the sale is by
sample as well as description, the goods must not only correspond with the
sample but also with the description.
Example: Andrews Ltd. V. Singer and Co. Ltd. 1934.
Andrews Ltd finds one car to be used one. The buyer reject the car or retain the
car and claim damages.
3. Condition as to Quality or Fitness(Section 16)

The doctrine of Caveat Emptor is applicable in the case of sale/purchase of

goods, which means ‘Buyer Beware’. The maxim means that the buyer must take
care of the quality and fitness of the goods he intends to buy and cannot blame
the seller for his wrong choice. However, section 16 of the Sale of Goods Act
1930 provides a few conditions which are considered as an implied condition in
terms of quality and fitness of the good:
When the buyer specifies the purpose for the purchase of the good to the seller,
he relied on the sound judgment and expertise of the seller for the purchase
there is an implied condition that the goods shall comply with the description of
the purpose of purchase.
When the goods are bought on a description from a person who sells goods of
that description (even if he doesn’t manufacture the good), there is an implied
condition that the goods shall correspond with the description. However, in case
of an easily observable defect that is missed by the buyer while examining the
good is not considered as an implied condition.
Example: Priest v. Last (1903)
In Priest v Last (1903)2K.B.148,P asked for a hot water bottle to S ,retail chemist ,he was
supplied one which burst after few days use and injured P’s wife. The court held that S
was liable for the breach of implied condition because P had made known to the Chemist
the purpose for which he buys the goods.

In Dr.Baretto v. T.R.Price, AIR 1939 Nag 19, A bought a set of false teeth from a dentist.
The set did not fit into A’s mouth. Held A could reject the set as the purpose for which
anybody would buy it was implicitly known to the seller, here the dentist.
4. Merchantable Quality:
There is an implicit requirement that the items be of merchantable quality when
purchased by description from a seller who trades in goods of that description
(whether or not as the manufacturer or producer).

In most cases, merchantable quality implies that the commodities should be

economically saleable at their full worth under the description by which they are
recognized in the market.
The condition as to merchantability must be constructed reasonably and the
seller will not be liable if certain facts are concealed from him and the
unsuitability arises because of those facts.
Example: A woman who had an abnormally sensitive skin bought a Harris tweed
coat, and got rashes through wearing the coat. Held, there was no breach of
condition as she had failed to disclose the fact of her skin being extra sensitive.
5. Sale by Sample (Section 17)
When the goods are to be supplied on the basis of a sample provided to the
seller by the buyer while the formation of a contract the following conditions are
implied:

Bulk supplied should correspond with the sample in quality

Buyer shall have a reasonable opportunity to compare the goods with the
sample
The good shall be free from any apparent defect on reasonable examination by
the buyer.
Examples:
1. Certain shoes were sold by sample for the French Army. The shoes were found to contain
paper not discoverable by ordinary inspection.
Held, the buyer was entitled to the refund of price plus damages.
2. In a contract for the sale of brandy by sample, the brandy that was supplied had been colored
with a dye. Held the buyer was not bound by the contract, though the bulk correspond with
sample, since the defect could not have been located on reasonable examination of the
sample[Mody v. Gregson(1868)].
Implied Warranties
1.Enjoy Possession of the Goods [Section 14(b)]
Section 14(b) of the Act mentions ‘an implied warranty that the buyer shall have
and enjoy quiet possession of the goods’ which means a buyer is entitled to the
quiet possession of the goods purchased as an implied warranty which means
the buyer after receiving the title of ownership from the true owner should not
be disturbed either by the seller or any other person claiming superior title of
the goods. In such a case, the buyer is entitled to claim compensation and
damages from the seller as a breach of implied warranty.
Implied Warranties
2.Goods are free from any charge or encumbrance in favour of any third party
[Section 14(c)]
Any charge or encumbrance pending in favour of the third party which was not
declared to the buyer while entering into a contract shall be considered as a
breach of warranty, and the buyer is be entitled to compensation and claim
damages from the seller for the same.
Auction Sale
A sale by auction is a public sale, where the goods are offered to be sold to the
buyer who offers the highest price for the goods or makes the highest bid.
The person inviting the bid is called the auctioneer, who acts as an agent of the
seller.
Salient features of an Auction
1. The auction is held at a predetermined place at a predetermined time.
2. The auctioneer invites the prospective buyers to make a bid for the goods
being auctioned.
3. The invitation to bid is in a public gathering.
4. The description of the goods being auctioned is announced prior to the
auction.
5. The offers made by the prospective buyers are by bidding.
6. The auctioneer makes the contract of sale with the highest bidder.
Completion of Contract of Sale [Sec
64(2)]
A sale by auction is complete when the auctioneer annonces its completion by
the fall of the hammer.
Until such announcement is made any bidder may withdraw his bid. This can be
done by the bidder on the principle that each bid is only an offer by the bidder
to the auctioneer and it can be withdrawn before it is accepted.
When the auctioneer announces the completion of the sale by the fall of the
hammer, the sale is complete and the property in goods passes immediately to
the buyer.
Resevation of right to bid[Sec 64(3)]
A right to bid may be reserved expressly by or any agent on behalf of the seller.
Where a right to bid is so reserved, the seller or any other person on his behalf
may bid at the auction.
Reserved Price[Sec 64(5)]
An announcement may be made before the auction about the reserved or upset price of the
goods.
This implies that the seller to safeguard himself from a possible loss, specifies a minimum price
for the goods. If the bids are below the reserved price, the auctioneer is not bound to accept ant
bid and sell the goods.
Where the sale is not notified by the
seller[Sec 64(4)]
In case where the sale is not notified to be subject to a right to bid by the seller
or any person nominated by him, it will be deemed to be a fraudulent act if the
seller or his nominee makes a bid in the auction.
Doctrine of Caveat Emptor
The doctrine of caveat emptor is a fundamental principle of the 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 of his own goods. The buyer must inspect the goods to find out if they will suit his
purpose.
Exceptions to the doctrine of caveat emptor.
1. Where the seller makes a false representation and buyer relies on that representation, the
buyer is entitled to goods according to that representation.
2. Where the consent of the buyer, in a contract of sale, is obtained by the seller by fraud or where
the seller actively conceals a defect in the goods.
3. Where the buyer makes known to the seller the purpose for which he is buying the goods and
the seller happens to be a person whose business is to sell goods of that description, then there is
an implied condition that the goods shall be reasonably fit for such purpose.
Transfer of property in Goods-
Meaning(Sections 18-25)
The phrase ‘property in goods’ means ownership of goods.
The ownership of goods is different from the possession of goods. The possession of goods
refers to the custody of goods.
For example, an agent, a servant, a hire purchaser, or a bailee may be in possession of goods, but
none of them is the owner of those goods because the property in the goods does not vest in
them, and each one of them holds the goods for his principal master, hire seller, or bailor
respectively.
‘Passing of property in goods means ‘transfer of ownership of the goods. When the goods are
sold, it is the property in the goods that are transferred to the buyer.
Significance of Transfer of Ownership

The following reasons indicate the importance of this question and they are also the rules to be
applied in the absence of an agreement (or arrangement or understanding) concerning these
points:
1.Risk Prima Facie Passes With Ownership
2.Exercise of Proprietary Rights or Action Against Third Party
3.Seller’s Right for Price
4.Insolvency of the Seller or Buyer
Risk Prima Facie Passes With Ownership
It is the rule of law that risk, at first sight, or on the first impression, passes with the
property. Therefore, if the property has passed to the buyer, he becomes the owner of
the goods and then the risk of destruction, deterioration, damages or loss of goods is
that of the buyer. He will have to bear the loss caused due to any reason.

Exercise of Proprietary Rights or Action Against Third Party

‘Proprietary right’ means a right to own and control like a proprietor or owner of some
property (estate). On transfer of ownership, the buyer can exercise proprietary rights
over the goods. For example, he can sue the seller if he refuses to deliver the goods and
the buyer can also recover the goods from another person to whom the seller has resold
the goods.
Moreover, if the goods are damaged or destroyed by an act of a third party, it is only the
person in whom the property vests who can take action against the wrongdoer.
Seller’s Right for Price
Seller’s right for price: The seller becomes entitled to recover the price of the
goods from the buyer only when the property in the goods has passed to the
buyer.

Insolvency of the Seller or Buyer

If the seller or buyer becomes insolvent, the question arises as to whether the
Official Receiver or the Assignee can take over the goods from him or not. The
answer depends upon the situation whether the property in the goods has
passed to the buyer or not.
If the ownership has passed to the buyer and the buyer is declared insolvent
by the Court, then the buyer’s Official Receiver shall have a right to take
possession of the goods even though the goods are still lying with the seller.
On the other hand, if the goods are in the possession of the seller and he is
adjudged insolvent, then the buyer has a right to take possession of the goods
from the seller’s Official Receiver.
Rules Regarding Transfer of Property

1.Where Goods Are Specific or Ascertained

2.Rules for Ascertaining the Intention of the Partie
3.Where goods are unascertained, or future goods
4.Where Goods Are Sent on Approval or ‘on Sale or Return
5.Risk Prima Facie Passes With Property
Where Goods Are Specific or Ascertained

Section 19 of the Sale of Goods act provides that “Where there is a contract for the
sale of specific or ascertained goods, the property in them is transferred to the buyer
at such time as the parties to the contract intend it to be transferred.

Rules for Ascertaining the Intention of the Partie

Where the goods are specific or ascertained, the following rules are to be applied for
ascertaining the intention of the parties in regard to the time at which the property in the
goods is to pass to the buyer:
1.Specific Goods in a Deliverable State
2.Specific Goods Not in a Deliverable State
3.Specific Goods Are in Deliverable State but the Seller Has to Do Something to Ascert
ain the Price
Specific Goods in a Deliverable State

‘Deliverable state’ means that state of goods in which the buyer shall be bound to
take delivery of them. According to Section 20 of Sale of Goods Act, if (i) the goods
are specific, (ii) the contract of sale is unconditional, i.e., there is no condition
regarding the transfer of ownership of goods, and (iii) the goods are in a deliverable
state, then in such a case, the ownership passes to the buyer at the time when the
contract is made. It is immaterial whether the time of payment of price or the time
of delivery of goods, or both, is postponed.
Specific Goods Not in a Deliverable
State

‘Not in a deliverable state’ means that the seller has something yet to do to the
goods for the purpose of putting them into a deliverable state. For example,
packing filling the goods in containers, collecting the goods, separating or
loading the goods, etc.
In such a case, according to Section 21 of Sale of Goods Act, “the property does
not pass until such thing is done and the buyer has notice thereof.”
Specific Goods Are in Deliverable State but the
Seller Has to Do Something to Ascertain the Price
If the specific goods are in a deliverable state but the seller is yet to weigh,
measure, test or do some other act or thing in connection with the goods for the
purpose of ascertaining the price, the ownership does not pass to the buyer
until such act or thing is done and the buyer has notice thereof (Section 22 of
Sale of Goods Act).
It means that in such a case, the ownership is transferred to the buyer at the
moment when two conditions are fulfilled: (i) the seller has done the act or
thing which is necessary for ascertaining the price of the goods, for example,
taking weight, measurement, counting, etc.
Transfer of titles by Non-owners
A Latin maxim says: ‘Nemo dat quod non habet’ which means that no one can give what he
doesn’t have. This is the ground principle regarding the transfer of title. Sections 27 to 30 of the 
Sale of Goods Act, 1930 specify these laws about the transfer of title.
Section 27 deals with the sale by a person who is not the owner. Imagine a sale contract where the seller –
•Is not the owner of the goods
•Does not have consent from the owner to sell the goods
•Has not been given authority by the owner to sell the goods on his behalf
In such cases, the buyer acquires no better title to these goods than the seller had, provided the conduct of
the owner precludes the seller’s authority to sell.
Exceptions to Section 27
In the following scenarios a non-owner of goods can transfer a better title to the buyer:
1] Sale by a Mercantile agent (Provison to Section 27)
Consider a mercantile agent, who is in possession of the goods or a document to the title of the goods, with the
consent of the owner. Such an agent can sell the goods when acting in the ordinary course of business of a
mercantile agent. The sale shall be valid provided the buyer acts in good faith and has no reason to believe that
the seller doesn’t have any right to sell the goods. The transfer of title is valid in such a case.

2] Sale by one of the Joint Owners (Section 28)

Many times goods are purchased in joint ownership. In many cases, the goods are kept in the possession of one
of these joint owners by the permission of the co-owners. If this person (who has the sole possession of the
goods) sells the goods, the property in the goods is transferred to the buyer. This is provided the buyer acts in
good faith and has no reason to believe that the seller does not have a right to sell the goods.
Example: Peter, John, and Oliver are three friends to buy a 42-inch television set to watch the upcoming cricket
World Cup. They unanimously decide to keep the television set at Oliver’s house. Once the World Cup is over,
the TV is still at his house.
One day, Oliver’s office colleague Julia visits his house and he sells the TV to her. She buys it in good faith and
has no knowledge about the fact that it was purchased jointly. In this case, she gets a good title to the TV.
3) Sale by a Person Who Is in Possession of Goods Under a
Voidable Contract

According to Section 29 of the Act, when the seller of the goods has obtained possession thereof
under a voidable contract (i.e., on the ground of coercion, fraud, misrepresentation or undue
influence) but the contract has not been rescinded (cancelled) at the time of the sale, the buyer
acquires a good title to such goods if he:
1.Buys them in good faith.

2.Without notice of the seller’s defect of title. For example, X obtains a car from a vehicle dealer by
playing a fraud upon him. The contract is voidable at the option of the dealer.

But before the dealer rescinds the contract, X sells the car to Z who buys it in good faith and without
notice of the defective title of X. Here, Z gets a good title.
4] Sale by Seller who has already sold the Goods but Continues to have Possession
[Section 30 (1)]

Section 30(1) of the Sale of Goods Act lays down that where a person, who has sold
the goods but continues to be in possession of them or of the documents of title to
them, resells such goods or documents, then a third person (new buyer) will get a
good title if he (i) buys them in good faith, and (ii) without any notice of the previous
sale. A pledge or any other disposition of the goods or of the documents of title to
them by such seller is also equally valid.
Example: A sold 100 bags of sugar to B. B delayed in taking the bags away. In the meantime A sold those bags
again to another innocent purchaser c who took it without the notice of prior sale and for value. C gets a good
title.
5] Sale by Buyer in possession after agreement to buy [Section 30 (2)]
Consider a buyer who obtains possession of the goods before the property in them is
passed to him, with the permission of the seller. He may sell, pledge or dispose of
the goods to another person.
If the second buyer obtains delivery of the goods in good faith and without notice of
the lien or any other right of the original seller, he gets a good title to them.

This rule does not hold true for a hire-purchase agreement which allows a person the
possession of the goods and an option to buy unless the sale is agreed upon.

Example: Peter takes a car from John under the conditions that he will pay Rs. 5,000
every month as rent of the vehicle and that he can choose to purchase it for Rs.
100,000 to be paid in 24 equal installments. Peter pays Rs. 5,000 for three months
and then sells the car to Oliver. In this case, John can recover his car from Oliver since
Peter had neither purchased the car nor agreed to purchase it. He only had an option
to buy the car.
6] Estoppel
When the owner of the goods, by his statement or conduct, lead the buyer to believe that the seller has
the authority to sell, then subsequently he may be estopped from denying the seller’s authority to sell.
Let us see an example. Peter, John, and Oliver are having a conversation. Peter tells John that he
owns the BMW car parked nearby which actually belongs to Oliver. However, Oliver remains silent.
Subsequently, Peter sells the car to John.
In this case, John will get a good title to the car even though the seller is Peter who has no title to it.
This is because, Oliver, by his conduct, did not deny Peter’s authority to sell the car.

7] Sale by an Unpaid Seller [Section 54 (3)]

Section 54(3) of the Sale of Goods Act lays down that where an unpaid seller who has exercised his
right of lien or stoppage in transit resells the goods, the buyer acquires a good title thereto as against
the original buyer whether the notice of resale has been given to the original buyer or not 
 UNPAID SELLER AND HIS RIGHTS

Chapter V of the Sale of Goods Act, 1930, deals with unpaid sellers. In a contract of sale, the seller is under an
obligation to deliver the goods, and the buyer has to pay for it. If the buyer fails or refuses to pay, such a
seller becomes an unpaid seller.
According to section 45(1) of the Sale of Goods Act, 1930, a seller of goods is called an “unpaid seller”, when:
1.The price has not been paid or tendered, or
2.A bill of exchange or other negotiable instruments (like a cheque) that was received as conditional payment has
been dishonoured.
Section 45(2) expands the definition of a seller to include anyone in a position of a seller (for example, the agent of
the seller to whom the bill of lading is endorsed, or a consignor or agent who has paid or is directly responsible for
the price).
Example 1: X sold some goods to Y for Rs 10,000. Y paid Rs 9,900 but failed to pay the balance of Rs 100. X becomes
an unpaid seller.
Example 2: X sold some goods to Y for Rs 5,000 on a cheque for the price as a conditional payment. On presentation,
the bank dishonoured the cheque. Here also, X becomes an unpaid seller.
We can broadly classify the rights of an unpaid seller under the following two categories:
I. Rights against goods.
II. Rights against the buyer personally.
Right of Lien
The right of lien means the right to keep possession of the goods until the seller receives the
due price.

Section 47 of the Sale of Goods Act provides that an unpaid seller (as agent or bailee of the
buyer) in possession of the goods has the right to keep possession of the goods until
payment or tender of the price in the following cases:

•Where the goods have been sold with no stipulation to credit, or

•Where the goods have been sold on credit, but the term of credit has expired, or
•Where the buyer becomes insolvent.

Further, section 48 of the Sale of Goods Act provides that despite the partial delivery of
goods by the unpaid seller, section 48 authorizes him to exercise his lien right on the rest.
In Grice vs Richardson (1877), the sellers had delivered a portion of the three bags of tea
under a contract of sale but had not been paid for the rest. Therefore, they could keep them
until the buyer paid the price.
Right to Stoppage of Goods in Transit

The unpaid seller delivered the goods to the carrier for transmission to the buyer, and in the meantime,
the buyer becomes insolvent, then the seller has the right to stop and retain the goods in transit. Thus,
the unpaid seller resumes possession of the goods as long as it is in transit.

The unpaid seller can exercise the right of stoppage in transit only if he fulfils the following conditions:
•The seller must have parted with the possession of goods, i.e., the goods must not be in the seller’s
possession.
•The goods must be in transit.
•The buyer must have become insolvent.
The right of stoppage in transit is earned only when the right of lien is lost and is available only where
the buyer has become insolvent.
Right to Resale the Goods
As per section 54 of the Sale of Goods Act, under the following circumstances, the unpaid seller may resell
the goods, if the goods are:

•Of a perishable nature, or

•When the unpaid seller exercised his right to lien or stoppage in transit and gave notice to the buyer of his
intention to resale.

Withholding Delivery
As per section 46(2) of the Sale of Goods Act, where the property in goods has not passed to
the buyer, the unpaid seller has, besides other remedies, a right to withhold the delivery.
Right against the Buyer
An unpaid seller besides his rights against goods, has the following rights against the buyer
personally. It is also known as the seller’s remedy for the breach of a contract of sale.
These rights are as follows:
1.Suit for price
2.Suit for damages for non-acceptance
3.Suit for damages for repudiation of the contract
4.Suit for interest