Sale of Goods

Amity Business SchoolMBA, Semester 2

Legal Aspects of BusinessMs. Shinu Vig

Amity Business School

Sale of Goods Act, 1930

Section 4 defines a contract of sale as “a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.”


Essentials of a Contract of Sale:

i. Atleast two parties.ii. Transfer or agreement to transfer ownership of

goods.iii. Subject matter of the contract must be goods.iv. Price is the consideration of contract of sale.v. All other essentials of a valid contract as per the

Indian Contract Act, 1872.

Sale: The property in goods is immediately transferred from the seller to the buyer, at the time of making the contract.

Agreement to sell: The transfer of property in goods is to take place at a future time or subject to some conditions thereafter to be fulfilled


Hire-purchase Agreement:• It is an agreement of hiring.• Possession of goods is transferred immediately.• Ownership is transferred on the payment of the last instalment when option to purchase is exercised.• Hirer has right to terminate the contract before transfer of ownership.• Vendor has right to re-possess goods in case of default.


Subject matter of Contract of Sale of Goods:

Goods:Goods means every kind of movable property other than actionable claims and money and includes

1. stock and shares, 2. growing crops, grass and things attached to or

forming part of the land which are agreed to be severed before sale or under the contact of sale.


Classification of Goods:i. Existing goodsii. Future goodsiii. Contingent goods

The Existing goods may be:a. Ascertained goodsb. Unascertained goods


Modes of determining Price of Goods:i. It may be fixed by the contract.ii. It may be left to be fixed in an agreed manner.iii. It may be determined by the course of dealing

between the parties.

Where the price is not determined in any of the above modes, the buyer must pay the seller a reasonable price.


Condition:It is a stipulation-i. essential to the main purpose of the contract, ii. the breach of which gives the aggrieved party a right

to terminate the contract.

Warranty:It is a stipulation-i. collateral to the main purpose of the contract, ii. the breach of which gives the aggrieved party a right

to claim for damages but not to terminate the contract.


Implied Conditions:

i. Implied Condition as to titleii. Implied Condition under a sale by description:• Goods must correspond with description• Goods must be of merchantable quality• Condition as to wholesomeness• Condition as to fitness for particular purposeiii. Implied conditions under a sale by sampleiv. Implied conditions in sale by sample as well as by

description


Implied Warranties:

i. Warranty as to quiet possessionii. Warranty as to freedom from encumbrancesiii. Warranty to disclose dangerous nature of goodsiv. Warranties implied by the custom or usage of trade


Doctrine of Caveat Emptor: (Section 16)

It means “let the buyer beware’.

This principle states that 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.(Ward v. Hobbs)


Exceptions to the doctrine:i. Seller makes a false representation.ii. Seller actively conceals defects in goods.iii. Buyer makes known to the seller the purpose for

which he is buying the goods.iv. If goods are sold by description, there is an implied

condition that goods will be of merchantable quality.v. Goods have some latent defects that no examination

could have revealed or detected.


Passing of Property in Goods:‘Property in goods’ means ownership of the goods.

Importance of knowing exact time of Passing of Property:1. Risk generally passes with ownership2. Action against third parties3. Suit for price4. Insolvency of the seller or the buyer

Rules for Passing of property1. Transfer of property in specific or ascertained goods•When goods are in deliverable state•When goods are to be put in deliverable state

2. Transfer of property in Unascertained or future goods

Rule of Transfer of Title on Sale

• The general rule is “ the seller cannot transfer to the buyer of goods a better title than he himself has.”

• The rule is expressed by the maxim, “nemo det quod non habet”.

• The rule aims at protecting the interests of the true owner.


Performance of a Contract of Sale:It is the duty of seller to perform the contract by delivering the goods and of the buyer to accept the goods and pay for them in accordance with the contract.

Delivery of goods:Delivery of goods means voluntary transfer of possession from one person to another. Delivery may be:i. Actual or physicalii. Symboliciii. Constructive


Unpaid seller:

The seller of goods is deemed to be unpaid seller:i. When the whole of the price has not been paid

ii. When the payment was made by a bill of exchange or other negotiable instrument and instrument has been dishonoured.


Rights of an Unpaid seller:

I. Rights against the goods:• Right of lien• Right of stoppage in transit• Right of resale

II. Rights against the buyer:• Suit for the price• Suit for damages for non-acceptance• Suit for special damages and interest


BUYER’S REMEDIES AGAINST THE SELLER

• Damages for non-delivery• Right of recovery of the price• Specific performance• Suit for breach of condition• Suit for breach of warranty• Recovery of interest

Date post:	21-Jul-2016
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Sale of Goods

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