LAW OF SALE OF

GOODS
 Introduction
 Till 1930,transaction relating to purchase and sale of
goods were regulated by the Indian contract
act1872,
 sections 76 to123 of the indian contract act,1872
were repealed and a separate act called ‘The Indian
sale of goods act,1930 was passed .
 It came into force on 1st july,1930 .With effect from
22nd September1963,the word ‘Indian’ was also
removed .
 Now ,the present act is called ‘The sale of goods
act,1930’.
 The act extends to the whole of India except the
state of Jammu and Kashmir
 Contract of sale of goods
 A contract of sale of goods is a contract whereby
the seller transfers the property to goods to the
buyer for a price.
 The term contract of sale is a generic term and
includes both sale and agreement to sell.
 Sale and agreement to sell
sale - Where under a contract of sale ,the
property in the goods is transferred from seller to
the buyer.
agreement to sell- Transfer of property in the
goods is to take place at future time.
 Essentials of contract of sale
1.Two parties- There must be two parties .i.e a buyer and
seller to effect a contract of sale and they must be
competent to contract

2.Goods –There must be some goods the property in

which is to be transferred from the seller to the buyer and
only the movable property is taken in to consideration.

3.Price-The consideration for the contract of sale called

price must be money. When goods are exchanged for
goods . It is not a sale but a barter.
4.Transfer of general property-There must be transfer
of general property as distinguished from special
property in goods from the seller to the buyer
(e.g) If A owns certain goods he has general
property in the goods .If he pledges them with B,B
has special property in the goods.
5.Essential elements of a valid contract- All the
essential elements of a valid contract must be present
in the contract of sale.
Contract of sale how made
 No particular form is necessary , it is made by both
offer and acceptance.
 It may express and implied.
 It contain delivery of both the payments and goods.
 sale and agreement to sell
1.Transfer of property
sale: Transfer of property from seller to buyer immediately.
agreement to sell: transfer of property from seller to buyer at a
future time.
2. Type of goods
sale : only existing and specific goods are taken in to
consideration.
Agreement to sell: future and contingent goods are taken.
3.Risk of loss
sale : If the goods are destroyed ,the loss fails on the buyer even
though the goods are in possession of the seller.
Agreement to sell : If the goods are destroyed ,the loss falls on
the seller even though the goods are in possession of the buyer.
4. Consequences of breach
sale- If the buyer fails to pay the price of the goods ,the
seller can sue for the price even though the goods are in
possession of seller.
Agreement to sell-If there is any breach of contract by the
buyer , the seller can sue for damages and not for the price
even though the goods are in possession of the buyer.
5.Right to resell
sale-the seller cannot resell the goods .If he does so the
subsequent buyer does not acquire title to the goods.
Agreement to sell-the buyer who takes the goods for
consideration and with out notice of prior agreement gets a
good title. The buyer can only sue the seller to damages .
6.General and particular property
sale-creates jus in rem that is gives right to the buyer to enjoy the
goods as against the world at large including seller.
Agreement to sell- jus in personam that is gives right to buyer against
the seller to sue for the damages.
7.Insolvency of the buyer
sale-If the buyer becomes insolvent without paying price the seller
cannot refuse to deliver the goods to the official receiver or assignee
and he will be entitled to a rateble dividend only for the price of the
goods.
Agreement to sell- If the buyer become insolvent the seller can refuse to
deliver the goods to official receiver or assignee
8.Insolvency of the seller
sale-the buyer is entitled to receive the goods from official receiver or
assignee
Agreement to sell-If the buyer paid the goods and seller becomes
insolvent ,he can only claim rateable dividend and not the goods
because property in them has not yet passed to him
 Subject matter of contract of sale
Goods form the subject matter of the contract of sale
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 the contract of sale .Trade
marks, copy rights, patent rights, goodwill, water, gas are
all goods’
Actionable claims and money
A debt due from one person to another person is an
actionable claim and cannot be bought or sold as goods.
Money here means current money and not rare coins
 Classification of goods
1.Existing goods:
These are the goods which are owned or possessed
by the seller at the time of sale. Only existing goods can be
the subject of a sale. The existing goods maybe-
(a) specific goods-The goods are identified and agreed
upon at the time of contract of sale is made.
(b)Ascertained goods-These are the goods which are
become ascertained subsequent to the formation of a
contract of sale.
(c)Un ascertained goods-These goods which are not
identified and agreed upon at the time of contract of sale.
2.Future goods – goods to be
manufactured ,produced or acquired after
making of the contract of sale are called future
goods .A contract for the sale of future goods
is an agreement to sell.
3.Contingent goods-goods the acquisition of
which by the seller depends upon an uncertain
contingency are called contingent goods.
(e.g) A agrees to sell 100 units of an article
provided the ship which is bringing them
reaches the port safely. This is an agreement
for the sale of contingent goods
 Effect of destruction of subject
matter
1.Goods perishing before making of contract
A contract for the sale of specific goods is void if at
the time when the contract was made ,the goods have
without the knowledge of the seller ,perished.
(e.g) A cargo of dates was sold .The dates were
contaminated with sea water so as to be unsaleable as
dates ,though they could be used for making sprits.
Held ,the contracts was void as the dates no longer
answered their description in the contract.
2.Goods perished after the agreement to sell but before the
sale is effected
An agreement to sell specific goods becomes void if
subsequently the goods ,without any fault on the part of the
seller or buyer ,perish.
 The price
The price in a contract of sale means the money
consideration for the sale of goods .It must be
expressed in money. It is the consideration for
the transfer the property in goods from the seller
to the buyer .It is not essential that the price
should be fixed at the time of sale.
Ascertainment of price
Price in a contract of sale may be
(a) fixed by the contract itself
(b)left to be fixed in an agreed manner
(c) determined by the course of dealing between the
parties .
In absence of this the buyer must pay reasonable
price
 Conditions and warranties
Introduction
 Every contract of sale contains a number of terms or
stipulations or statements or representations regarding the
nature ,price and quality of goods .

 But of all them are not of equal importance .

 Some of these stipulations may be major terms while others

may be minor terms.

 In law of major terms are called conditions and minor

terms are called warranties
Conditions:
A condition is the stipulations essential to the
main purpose of the contract .It is regarded as the
very basis or foundation of the contract .
If there is breach of the condition, the
aggrieved party can treat the contract as void and
claim damages
Section 12(2) defines condition as “ 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”
(e.g) A sells a watch to B saying that it is a swiss
made watch is a condition because swiss watches are
well known through out the world for their quality.
The whole contract is based on this condition. If the
watch is not a swiss watch ,B can reject the watch
and claim damages .
warranty:
A warranty is a stipulation subsidiary to the main
purpose of the contract .It is not essential to main purpose
of the contract .It is not very basis or foundation of the
contract .If there is breach of warranty the aggrieved party
cannot treat the contract as void and he can claim
damages.
Section 12(3) defines warranty as “ a stipulation
collateral to the main purpose of the contract ,the breach of
which gives the aggrieved party a right to sue for damages
only not to avoid the contract itself”
In a contract of sale conditions and warranties may
be expressed or implied . Express conditions and warranties
are those which are entered in clear words in the contract .
Implied conditions and warranties are those which the law
incorporates in to contract unless the parties agree to the
contrary. They may however be cancelled or varied .
 Implied conditions
1.Condition as to title
sale- the seller has right to sell the goods at the time the
sale is effected.
agreement to sell-the seller will have the right to sell the
goods at the time when the property is to pass .
If the seller has no right to sell the goods and the buyer has
to return them to the owner and the buyer can claim the
price from the seller.
2. Condition as to description
Where the goods are sold by description there is
implied condition that the goods shall correspond with the
description. If they are not the buyer may reject them or
accept them and claim damages.
3.Condition as to sample
Where goods are sold by sample , there is an implied
condition
(a) that bulk of the goods shall correspond with the
sample quality.
(b)that the buyer shall have a reasonable opportunity
of comparing the bulk with the sample and
(c)that the goods shall be free from latent defects .
4. Condition as to sample and description
Where the goods are sold with description and
sample ,the goods shall correspond with both description
and sample .If the goods are not correspond with any one
of the description and sample ,the buyer can reject the
goods.
5.Condition as to fitness or quality
There is no implied condition as to quality, or fitness
for any particular purpose. Because the buyer has to buy
the goods after satisfying himself of their quality and fitness
. But there is implied conditions as to fitness and quality
(a)Where the buyer has made known to the seller the
particular purpose for which he needs the goods.
(b) where the buyer relies on the seller’s skill and
judgment as regards the suitability of the goods.
(c)Where the goods are purchased by description
from the seller who deals in such class of goods
(d) where the consent of buyer was obtained by the
seller by fraud or misrepresentation
6. Condition as to merchantability:
Merchantability means acceptability in the market.
Where goods are bought by description from a seller who
deals in goods of that description ,there is an implied
condition that the goods shall be merchantable quality
7 condition as to wholesomeness
In contract of sale of eatables and provisions ,the
goods must not only answer to description and be
merchantable but must also be wholesome
(e.g) A bought a bread from a store .It contained a
stone which broke A’s teeth. Held ,the seller was liable in
damages because he violated the condition of
wholesomeness
Implied warranties
1.Warranty of quiet possession
2.Warranty of freedom from encumbrances.
3.Warranty as to quality or fitness by usage of
trade.
4.Warranty to disclose dangerous nature of goods.
Caveat emptor
1.This means ‘let the buyer be aware’ in the contract of sale of
goods the seller is under no duty to reveal unflattering truths
about the goods sold .Therefore when a person buys some goods
he must examine them thoroughly . If the goods turn out to be
defective or do not suit his purpose or if eh depends upon his
own skill or judgment and makes bad selection ,he cannot blame
anybody excepting himself
Exceptions
1.Fitness for buyers purpose –Expressly explained the purpose
he requires the goods and he relies on sellers skill and
judgement.
2.Sale under a patent or trade name.
3.Merchantable quality-When the goods are bought by the
description from a seller who deals in goods of that
description ,there is an implied condition that the goods
must be merchantable quality.
4.Usage of trade.
5.Consent by fraud. Getting consent from the seller by fraud.
 Performance of the contract
Performance of contract of sale means as regards the seller ,
delivery of goods to the buyer and as regards the buyer,
acceptance of the delivery of the goods and payment fro
them .

Delivery of goods
Delivery means voluntary transfer of possession of goods from
one person to another .
It may be 3 types
(a) actual- Where the goods are handed over by the seller to the buyer or
his duly authorized agent.
(b) Symbolic –Where the goods are ponderous and incapable of actual
delivery ,the delivery may be symbolic .
(c) Constructive delivery-Where the third person in possession of the goods
of the seller at the time of the sale acknowledges to the buyer that he
holds the goods on his behalf.
 Rules as to delivery of goods
1.Mode of delivery-actual , symbolic and constructive
2.Delivery and payment are concurrent conditions- if there is
no agreement when to make payment and delivery of
goods.
3.Effect of part delivery- same effect when the seller delivers
the part of the goods to the buyer.
4.Buyer to apply for delivery-apart from express contract ,the
seller of goods is not bound to deliver them untill the buyer
applies for delivery.
5.Place of delivery-Where the place at which delivery of the
goods is to take place is specified in the contract ,the goods
must be delivered at that place during business hours on a
working day
6.Time of delivery-the seller is bound to deliver the goods with in
reasonable time .
7.Goods in possession of third party-When at the time of the sale of the
goods are with a third party there is no delivery by the seller to the
buyer untill such party acknowledges to the buyer that he holds them
on his behalf
8.Cost of delivery-all expenses must be borne by the buyer if there is no
agreement the expense must be borne by the seller.
9.Delivery of wrong quantity
(a) delivery of goods less than contracted for-reject the goods
(b) delivery of goods in excess of the quantity contracted for-accept or
reject or accept the contracted quantity and reject the rest.
(c)Delivery of goods contracted for mixed with other goods-accept the
contracted goods and reject the rest.
10.Instalment deliveries
the seller is not entitled deliver the goods by installments and if
he does so the buyer is not bound to accept the goods . If there is any
agreements the installments procedure can be taken for consideration
 Rights of buyer
1.Right to have delivery as per the contract.
2.Right to reject the goods .
3.Right to repudiate.
4.Right to notice of insurance.
5.Right to examine
6.Right against the seller for the breach of contract
(a)suit for damages.
(b)suit for price.
(c)suit for specific performance.
(d)suit for breach of warranty.
(e) repudiation of contract before due date.
(f) suit for interest.
 Duties of buyer
1.Duty to accept the goods and pay for them in
exchange for possession.
2.Duty to apply for delivery.
3.Duty to demand delivery at a reasonable hour.
4Duty to accept instalment delivery and pay for it.
5.Duty to take risk in deterioration in course of
transit.
6.Duty to intimate the seller where he rejects the
goods.
7.Duty to take the delivery.
8.Duty to pay price.
9.Duty to pay for non acceptance.
 Unpaid seller
The seller who has not received the
whole of the price of the goods sold is called
an un paid seller.
According to section 45, the seller of
goods is deemed to be an unpaid seller:
(a) when the whole of the price has
not paid or rendered.
(b)When a bill of exchange or other
negotiable instruments has been received as
conditional payment and the same has been
dishonored .
(c)A seller who has been partly is
also an unpaid seller.
 Rights of an unpaid seller
a)Rights against the goods:
An unpaid seller has some rights against the goods
sold when the property in the goods has passed to the
buyer.
(i)Right to lien-Lien is a right to retain possession of
goods until payment of price. According to section 47(1) an
unpaid seller can exercise the right of lien in the following
cases:
1.Where the goods have been sold without any
stipulation as to credit.
2.Where the goods have been sold on credit but the
period of credit has expired.
3.Where the buyer becomes insolvent.
ii)Right of stoppage of goods in transit
It is just an extension of right of lien .The right
of stoppage of goods in transit is a right of stopping the
goods ,while they are in transit and retaining the possession
until payment of the price.
When can this right be exercised
1. the seller must be paid.
2. the seller must have parted with possession of the goods.
3.the goods must be in transit.
4.the buyer becomes insolvent.
5.the property in the goods must have passed from the
seller to the buyer.
iii)Right of resale
An unpaid seller who has exercised the right of lien
or the right of stoppage of goods transit can resell such
goods. The right to resell the goods is called right to resale.
When this right be exercised
1.Where the goods are perishable.
2.Where the seller expressly reserves the right of resale in
case of default.
3.Where the seller exercised his right of lien or right of
stoppage in transit and gives notice to the buyer of his
intention to resell the goods.
iv)Right of with holding delivery
Where the property in the goods has not passed to
the buyer ,the seller has the right of with holding the
delivery.
b)Right against the buyer personally
i)suit for price.
ii)suit for damages for non acceptance.
iii)suit for repudiation .
iv)suit for interest.