Sale of Goods Act 1930

Contd -
 Act Deals with movable goods
 Sec 4(1) – contract of sale – 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.
Essential elements
Contract of sale
Contract of sale and agreement to
sell
 Sale & Agreement to Sell

 The ownership is  At some future date

transferred  Executory Contract
immediately  The seller is responsible for
 Executed contract any loss or destruction of
 The buyer is goods even if goods are in
responsible for any loss the possession of the buyer.
or destruction of the The seller remains the
goods even if goods are owner until the agreement
in the possession of the to sale becomes sale
seller.
 Sale and Agreement to Sell

 Sometimes the  If buyer becomes

possession of goods is insolvent, the seller
with the seller and If may refuse to deliver
buyer becomes insolvent,
the goods.
in the absence of seller’s
right of lien, the seller
must deliver the goods to
the Receiver or official
assignee.
 Sale and Agreement to Sell

In such case seller can claim

rateable dividend in the
insolvency for the price of
the goods.

 If the seller becomes

 The buyer can not
insolvent, the buyer who has recover the goods even
paid has right to recover if price has been paid
goods from the Receiver or by him as he is not the
Official Assignee. owner of the goods.
 Sale and Hire purchase
 Sale  Hire purchase
 The buyer is the owner  He is the bailee till he
of the goods pays all instalments
 The buyer cannot  The buyer may
terminate the contract terminate the contract
by returning the goods
to the owner without
paying the reminder of
the instalments
 Distinction between sale and
bailment
 Transfer of ownership  Transfer of possession
from seller to the of goods from bailor to
buyer the bailee

 The buyer enjoys all  Can deal with the

the rights of his goods according to the
property directions of the bailor
 Contd/-
 The seller takes the  The owner takes no
risk risk, if the hirer doesn
not pay the
instalments the goods
are taken back
 Tax is not leviable
 Tax is levied at the until it turns into sale
time of sale and
agreement to sell
 Condition and warranties
 Both seller and buyer make representations
to each other at the time of entering into
contract of sale.
 Some of these representations are mere
opinions which do not form a part of the
contract of the sale. Whereas some become
part of the contract of sale
 Contd -
 Representations which become part of the
contract of sale are termed as stipulations
which may rank as condition or warranty
 Stipulation – Sec 12(1) – A stipulation in a
contract of sale of goods may be a condition
or warranty.
 Meaning of condition
 A condition is a stipulation –
 (a) which is essential to the main purpose of the
contract
 (b) the breach of which gives the aggrieved
party a right to terminate the contract.
 It goes to the root of the contract.
 Its non-fulfillment upsets the very basis
of the contract.
 Warranty
 It is a stipulation collateral to the main
purpose of the contract
 It is of secondary importance
 It is an assurance or guarantee in contract
to fulfill the obligations of sales of goods,it is
a promise of what is claimed to be with
guarantee to repair or replace during the
stipulate period
 If there is a breach of a warranty, the
aggrieved party can only claim damages and
it has no right to treat the contract as
repudiated.
 Condition and warranties
 There is no hard and fast rules as to which
stipulation is a condition and which one is a
warranty.
 Whether a stipulation is a condition or a
warranty depends in each case on the
construction of the contract as a whole.
 The court is not to be guided by the
terminology used by the parties to the
contract
 Basis of distinction
Condition
 It is a stipulation which is
essential to the main
purpose of the contract.
 The aggrieved party can
terminate the contract
 A breach of condition can
be treated as a breach of
warranty . For example, a
buyer may like to retain
the goods and claim only
damages.
Warranty
 It is a stipulation which is
only collateral to the main
purpose of the contract
 The aggrieved party can
claim damages but cannot
terminate the contract.
 A breach of warranty
cannot be treated as a
breach of condition.
 Types of Conditions

(i) Express Condition; & (ii) Implied Condition

(i) Express Condition

It is a condition, which has been expressly agreed upon
by both the parties at time of the contract of sale.
(ii) Implied Condition
It is the condition which has not been included in the
contract of sale in express words, but the law presumes
that the parties have incorporated it into contract.
 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
 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 Quality or Fitness for Buyer’s Purpose
[Section 16(1)]

This implied condition will be there only if the following

requirements are fulfilled:
• The buyer requires goods for a particular purpose.
• The buyer should make it known to the seller about
that particular purpose.
• The buyer should rely on the seller’s skill and
judgment.
• The seller’s business is to supply such goods whether he
is the manufacturer or producer or not.
 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.
.
 Warranty
Sec 12(3) of the Sale of Goods Act defines warranty as ‘ 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 a right to reject the goods and treat
the contract as repudiated.
 Kinds of Warranty

(i) Express Warranties; and

(ii) Implied Warranties.
Implied Warranties:
Warranty as to Quiet Possession [Sec 14(b)]
Warranty as to Free from Encumbrance [Sec 14(c)]
Warranty of disclosing the dangerous nature of goods
to the ignorant buyer
Warranty as to free from encumbrance
[Sec14(c)]
Warranty of disclosing the dangerous nature of goods to
the ignorant buyer
 Conditions and warranties
 Implied warranties –
 Warranty of quite possession
 Warranty as to freedom from encumbrances
 Warranty to disclose dangerous nature of
goods
 Doctrine of caveat emptor
 “Let the buyer beware”
 It is the duty of the buyer to be careful while
purchasing goods of his requirement and in
the absence of the enquiry from the buyer,
the seller is not bound to disclose every
defect in the goods of which he may be
cognisant.
 Exceptions to the doctrine of
caveat emptor
 In case of misrepresentation by the seller
 In case of concealment of latent defect
 In case of sale by description
 In case of sale by sample
 In case of sale by sample and description
 Fitness for a particular purpose
 Merchantable quality
 Passing of property
 Transfer of property in goods from the seller to
the buyer is the main object of a contract of sale.
 “property in goods” means the ownership of
goods
 An article may belong to A although it may not be
in his possession. B may be in possession of that
article although he is not its owner.
 It is important to know the precise moment of
time at which the property in goods passes from
the seller to the buyer for the following reasons
 Contd -
 Significance – Time of transfer of ownership of
goods decides various rights and liabilities of the
seller and buyer.
 Risk – Owner to bear the risk and not the person
who merely hs the possession
 Action against third party – Owner can take action
and not the person who merely has possession.
 Contd/-
 Action against third parties :- The third
parties involved in the delivery of goods are
liable for action from the owner.
 Suit for price; - The seller can sue the buyer
for price
 Insolvency;- The official receiver or
assignee takes over the goods
Types of goods
 Types of existing goods
 Specific goods
 Ascertained goods
 Unascertained goods
 Goods sent “on approval” or “on sale on
return basis”
 Primary rules
 Goods must be ascertained – Where there is a
contract for the sale of unascertained goods, no
property in the goods is transferred to the buyer
unless and until the goods are ascertained.
 Intention of the parties –Where there is a contract
for the sale of specific or ascertained goods the
property in them passes to the buyer at the time
when the parties intend it to pass
 Contd -
 Where the intention of the parties cannot be
ascertained from the contract-
 Specific goods –
 Passing of the property at the time of the contract –
Where there is an unconditional contract for the sale
of specific goods in a deliverable state, the property
in the goods passes to the buyer when the contract is
made.
 Contd-
 Passing of property delayed beyond the
date of the contract
 (1) Goods not in a deliverable state –Where
there is a contract for the sale of specific goods
not in a deliverable state,ie, the seller has to do
something to the goods to put them into a
deliverable state, the property does not pass
until such thing is done and the buyer has
notice of it.
 Contd -
 (2) When the price of goods is to be ascertained
by weighing, etc. – Where there is a contract for
the sale of specific goods in a deliverable state,
but the seller is bound to weigh measure test or
to do some other act or thing with reference to
the goods for the purpose of ascertaining the
price the property does not pass until such act
or thing is done and the buyer has notice
thereof
 Contd -
 Unascertained goods –
 Where there is a contract for the sale of
unascertained goods, the property in the goods
does not pass to the buyer until the goods are
ascertained. Until the goods are ascertained
there is merely an agreement to sell.
 Contd -
 Where there is a contract for sale of
unascertained or future goods by description
and goods of that description and in a
deliverable state are unconditionally
appropriated to the contract, the property in
the goods thereupon passes to the buyer.
 “ascertainment of goods’, “unconditional
appropriation to the contract”
 Delivery to carrier
 A seller is deemed to have unconditionally
appropriated the goods to the contract
where he delivers them to the buyer or to a
carrier or other bailee for the purpose of
transmission to the buyer and does not
reserve the right of disposal.
 Goods sent on approval or “on
sale or return’
 When goods are delivered to the buyer on
approval or ‘on sale or return’ or other
similar terms the property therein passes to
the buyer –
 (1) When he signifies his approval or
acceptance to the seller:
 (2)When he does any other act adopting the
transaction
 Reservation of right of disposal
 The property in goods whether specific or
subsequently appropriated to the contract
does not pass to he buyer if the seller
reserves the right of disposal of goods until
certain conditions are fulfilled.
Transfer of Title by Person not the
owner
 General rule – Only the Owner of goods can sell the
goods
 No one can give a better title than what he himself
has.
 This rule is expressed by the maxim, ‘Nemo Dat
Quod Non Habet‘ - no one can pass a better title than
he himself possess.
 Thus, even a bonafide buyer who buys stolen goods
from a thief or from a transferee from such thief can
get no valid title to them since the thief has no title,
nor he could give one to any transferee
 Exceptions to the general rule

1. Sale by a mercantile agent

2. Sale by a joint owner
3. Sale by a person in possession under a voidable
contract
4. Sale by a seller in possession of goods after sale
 Sale by a buyer in possession of goods
1. Sale by an unpaid seller
2. Exceptional cases under other Acts
 Performance of the Contract of
Sale
 The contract of sale of goods is to be performed
where the seller delivers the goods and the
buyer pays. If there is something more complex,
then this stated in the contract as special terms.
 Delivery of goods may be defined as voluntary
transfer of possession of goods from seller to
buyer.

 Delivery.
 The delivery of goods sold may be made by doing anything
which the parties agree shall be treated as delivery or
which has the effect of putting the goods in the possession
of the buyer or of any person authorised to hold them on
his behalf.
 Therefore, any other act, in addition to transfer of physical
possession, which the parties agree to treat as equivalent
thereto, has the effect of delivery.
 Actual delivery , Constructive delivery,symbolic delivery
 Rights of buyers
 Receive delivery as per contract
 Reject goods when not as per contract
 Repudiate the contract
 Receive notice of insurance
 Examine goods before accepting
 Against the seller for breach of contract to suit
for price, specific performance,breach of
warranty, repudiation of contract before
due,interest
 Duties of buyer
 Accept the goods
 Apply for delivery
 Demand delivery at reasonable time/hour
 Responsibility of risk in the course of
transportation
 Intimate the seller on rejection of goods
 Take delivery
 Pay the price
 Damages for non acceptance
 Rights of an unpaid seller
 Meaning of an unpaid seller – Sec 45(1)(2)
 The seller of the goods is deemed to be an
‘unpaid seller’ -
 (a) When whole of the price has not been paid or
tendered
 (b) When a bill of exchange or other negotiable
instrument (such as cheque) has been received as
conditional payment and it has been dishonoured
[sec 45(1)]
 Contd -
 The seller shall be called an unpaid seller even
when only a small portion of the price remains
to be paid.
 It is for the non-payment of the price and not
for other expenses that a seller is termed as an
unpaid seller.
 Where the goods have been sold on credit, the
seller cannot be called as an unpaid seller
during the credit period unless the buyer
becomes insolvent. On the expiry of credit
period if the price remains unpaid, then only
the seller will become an unpaid seller
 Contd -
 Where the full price has been tendered by
the buyer and the seller refused to accept it,
the seller cannot be called as an unpaid
seller.
 Rights of an unpaid seller
 Against goods
 Against buyer personally
 AGAINST GOODS

Where the property in Where the property

goods has passed to in goods has not
the buyer passed to the buyer
 Contd -
 Where the property in goods has passed to
the buyer

Right of Right of Right of

lien stoppage in resale
transit
 Right of lien
 The right of lien means the right to retain
the possession of the goods until the full
price is received.
 Circumstances under the right of lien can be
exercised
 Where the goods have been sold without any
stipulation to credit
 Where the goods have been sold on credit, but the
term of credit has expired
 Where the buyer becomes insolvent
 Right of stoppage of goods in
transit
 Right of stoppage in transit means the right
of stopping the goods while they are in
transit, to regain possession and to retain
them till the full price is paid.
 Conditions under which Right of stoppage in
transit can be exercised
 (i)Seller must have parted with the possession
of goods,ie, the goods must not be in the
possession of the seller
 Contd -
 (ii) the goods must be in course of transit
 (iii) buyer must have become insolvent
 Right of resale
 An unpaid seller can resell the goods under the
following circumstances:
 (i) Where the goods are of a perishable nature
 (ii) Where the seller expressly reserves the right of
resale if the buyer commits a default in making
payment
 (iii)Where the unpaid seller who has exercised his right
of lien or stoppage in transit gives a notice to the buyer
about his intention to resell and buyer does not pay or
tender within a reasonable time.
 Contd -
 Where the property in goods has not passed
to the buyer

Withholding
delivery Lien Stoppage in Resale
transit
 Contd -
 Against the buyer personally

Suit for Suit for Suit for

price damages interest
 Contd -
 Buyer’s suits
 (a) Suit for damages for non-delivery of the
goods
 (b) suit for specific performance
 (c) Suit for breach of warranty
 (d)Suit for interest
 (e)Suit for damages for repudiation of contract
by the seller before the due date.
 Remedies for breach of contract
of sale
 (1) seller’s suits
 (a) Suit for price
 (b) Suit for damages for non acceptance of the
goods
 (c) Suit for damages for repudiation of contract
by the buyer before the due date
 (d) Suit for interest.
 Passing of Property in Goods in
the Case of Foreign Trade.
 F.O.B. contracts. - This means that the property in goods
passes to the buyer only after the goods have been loaded on
board the ship, and accordingly, the risk attaches to the
buyer only on shipment of goods.

 C. I. F contracts. - It is a contract for the sale of insured

goods, lost or not lost, to be implemented by the transfer of
certain documents. These documents are (i) Bill of lading; (ii)
Insurance policy; (iii) Invoice; (iv) A certificate of origin.

 Ex-ship contracts. - Under this agreement the seller has to

deliver the goods to the buyer at the port of destination. The
price quotation will include all expenses up to the point of
delivery of the goods at the port of destination.