Sale of Goods Act,1930
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
Essentials1. 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 unconditional 6. All other essential of contract must be present(like free consent, capacity of parties, legal object, offer and acceptance etc.)
Sale and Agreement to ell 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 SellSr. No 1. 2.
Agreement to SellExecutory Contract
Seller can sue the buyer for price of Seller cant goods Loss of goods will fall on buyer even if they are in possession of seller because Risk is associated with Ownership When buyer pays for price and seller becomes insolvent, he can recover it from Official Receiver or Assignee If buyer becomes insolvent, he needs to deliver goods to Official Assignee or Reliever Loss is borne by Seller even though they are in possession of buyer.
Seller can refuse to deliver goods
Goods Goods means every kind of moveable property other than actionable claims and money and includes stocks and shares, growing crops, grass and things attached to or forming part of land which are agreed to be severed before sale or under the contract .
Classification of Goods Existing Goods Owned and possessed by seller at the time of contract 1. Specific and Ascertained Goods identified and agreed upon at the time of contract of sale Goods indicated by description and not specifically identified
2. Generic and Unascertained
Future Goods Contingent Goods
Conditions and Warranties Condition [sec. 12(2)] A stipulation essential to the main purpose of contract. Breach of which gives rise to a right to treat the contract as repudiated or broken.
Warranty [sec. 12(3)] A stipulation collateral to the main purpose of contract. Gives right to claim for damages but not right to reject goods
E.g. A places order to buy a machine parts with B strictly according to the sample within 3 months. Here, providing parts strictly according to the sample is Condition. Providing it within 3 months is Warranty.
Whether a stipulation is condition or warranty is to be inferred from the contract itself. Its to be mentioned in contract.
Condition Vs. WarrantyConditionA stipulation essential to the main purpose of contract
WarrantyA stipulation collateral to the main purpose of contract.
Breach of which gives rise to a right to treat the contract as repudiated or brokenA breach of condition may be treated as breach of warranty in certain circumstances
Gives right to claim for damages but not right to reject goods
Vice versa is not treated
Implied Warranty and Conditions Warranty may be express or Implied. It is Implied in following cases: 1. Warranty as a title [sec.14] Seller has right to sell goods Buyer shall enjoy quiet possession of goods Goods shall be free from any charge
Implied Warranty and Conditions2. Sale by description [sec.15] Buyer gives description of goods. E.g. Particular brand, mode of transfer, particular TM, physical appearance etc.Bulk shall correspond with sample in quantity Buyer shall have reasonable opportunity of comparing bulk with sample
3. Sale by sample [sec.17]
Implied Warranty and Conditions Goods shall be free from any defectRejection of part or whole order is a right with buyer
4. Sale by sample as well as description [sec.15] Its not sufficient that bulk of goods corresponds to sample but shall also be according to description
5. Warranty as to quality or fitness [sec.16]
Implied Warranty and Conditions6. Warranty as to quiet possession free from encumbrances
CAVEAT EMPTOR CAVEAT EMPTOR means Buyer Beware Exceptions: Fraud For specific purpose Goods are ordered for specific purpose Seller is made aware of it Buyer relies on skill or judgment of seller
Merchantable quality Sale is made by description Purchase from seller who deals in goods of that description
Transfer of property or ownership Transfer of property or ownership is distinct from delivery of goods Ownership may pass without delivery of goods Delivery of goods does not constitute ownership Risk and ownership Goods remain at sellers unless passed to buyer Goods remain at buyers risk once passed to buyer
Time when property passes Section 18-26
1. For specific or ascertained 2. Generic, unascertained or future
A. For specific or ascertained
Property in case of specific or ascertained goods passes when intended to pass [sec.19] Must be: Terms of contract Conduct of parties Circumstances of case
Following are rules for ascertaining intentions of parties as to the time when property will pass:1. Specific goods in deliverable state [sec.20] When goods are in deliverable state, property passes when contract made
2. When goods are to be put into deliverable state [sec.21] 3. Specific goods in deliverable state, when the seller has to do anything thereto in order to ascertain price [sec.22] Weight,measure,test or some other act to asc. price
4. Goods sent on approval or on sale or return [sec.24] Property passes in following cases: Buyer signifies his approval to seller Buyer does any other act adopting the transaction Buyer doesnt accept it but does not return in time
B. For generic or unascertained or future goods Following are rules for ascertaining intentions of parties as to the time when property will pass:1. 2. Goods must be ascertained [sec.18] Goods must be un-conditionally appropriated
Transfer of Title [Sec. 27-30]Nemo dat quad non habet No one can give that which he possesses not. When goods are sold by person who is not its owner, buyer does not get good title of those goods
Buyer does not obtain better title in following cases: Person who bought goods under hire-purchase agreement sells them. In an auction sale, stolen goods are sold and none of the parties have its knowledge.
Exceptions to the rule: Sale by non-owners1. Title by estoppel [sec.27] 2. Sale by mercantile agent [sec.27] Authorized to sell goods on principles behalf Any sale by agent binds principle
3. Sale by one of the joint owners [sec.28] 4. Sale of goods by a person in possession of goods under a voidable contract [sec.29] 5. Sale by seller in possession after sale [sec.30(1)]
6. Sale by unpaid seller [sec.54(3)] 7. Sale in market overt
Rights of an Unpaid Seller An unpaid seller is one who1. Has not received the whole of the price 2. He has received payment in the form of BOE or negotiable instrument which is dishonored
A seller who is partly paid is also considered as an unpaid seller
Rights of an Unpaid SellerRIGHTS OF AN UNPAID SELLER
When property in goods has passed
When property in goods has not passed
Stoppage in transit
Right of LienA. Right of Lien [sec.47] Right to retain possession of the goods until claim is paid or satisfied Possession of goods which are owned by another person (buyer) Possession is essential to create right of lien
Right of Lien When can seller exercise his Right of lien: Goods have not been sold on credit Goods have been sold on credit & terms of credit has expired. During currency of credit, right can not be exercised Buyer becomes insolvent and seller is in possession of goods
Right of Lien Where a seller has partly delivered goods and partly retaining, he can exercise right of lien on reminder Seller loses Right of lien if he parts with actual possession of goods
Right of Lien Termination of Lien When he delivers goods to carrier or bailee for transfer to buyer Buyer or lawyer lawfully obtains possession of goods Seller waives right of lien
Rights of Stoppage in TransitB. Rights of Stoppage in Transit [sec.50] When buyer becomes insolvent, seller who parted with possession of goods has right of stopping them in transit When goods are delivered to middleman, transit begins Transit ends after buyer acquires possession of goods When right of lien ends, right of stoppage in transit begins
Essentials: Seller must be unpaid wholly or partly Buyer must have become insolvent Goods must be in transit
Duration of transit [sec.51] Loss of possession by seller to middleman until possession by buyer When buyer obtains possession of goods, seller loses right of stoppage in transit
How is stoppage in transit effected? By taking actual re-possession By giving notice of his claim to the middleman to redeliver the goods to the seller
Right of Lien Vs. Right of Stoppage in TransitRight of Lien Right of stoppage in transit
Can be exercised if buyer does not pay.
Can be exercised if buyer becomes insolvent.Can be exercised if goods are in transit.
Can be exercised if seller has actual possession of goods. Right ends with parting of possession of goods. Right of lien is to retain possession.
Right ends with actual possession by buyer. Right of lien is to regain possession.
Right of Re-saleC. Right of Re-sale [sec.54] Unpaid seller can exercise this right if He has possession of goods or Has regained possession of goods by using right of stoppage in transit
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