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 parties2. Transfer or agreement to transfer ownership of
goods3. Subject matter of contract must necessarily be
‘goods’4. The consideration is price5. Contract may be absolute or unconditional6. 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 Sale Agreement to Sell
1. Executed Contract Executory Contract
2. Seller can sue the buyer for price of goods
Seller can’t
3.
Loss of goods will fall on buyer even if they are in possession of seller because ‘Risk’ is associated with ‘Ownership’
Loss is borne by Seller even though they are in possession of buyer.
4.
When buyer pays for price and seller becomes insolvent, he can recover it from Official Receiver or Assignee
Buyer can’t
5.If buyer becomes insolvent, he needs to deliver goods to Official Assignee or Reliever
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 contract1.Specific and Ascertained• Goods identified and agreed upon at the time of contract
of sale2.Generic and Unascertained• Goods indicated by description and not specifically
identified
• 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. Warranty
Condition WarrantyA stipulation essential to the main purpose of contract
A stipulation collateral to the main purpose of contract.
Breach of which gives rise to a right to treat the contract as repudiated or broken
Gives right to claim for damages but not right to reject goods
A breach of condition may be treated as breach of warranty in certain circumstances
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 Conditions
2. Sale by description [sec.15]• Buyer gives description of goods.• E.g. Particular brand, mode of transfer, particular
TM, physical appearance etc.
3. Sale by sample [sec.17]• Bulk shall correspond with sample in quantity• Buyer shall have reasonable opportunity of
comparing bulk with sample
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 Conditions
6. 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 seller’s unless passed to buyer– Goods remain at buyer’s risk once passed to buyer
Time when property passes
• Section 18-26
1. For specific or ascertained2. 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 doesn’t 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. Goods must be ascertained [sec.18]2. 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-owners
1. Title by estoppel [sec.27]2. Sale by mercantile agent [sec.27]– Authorized to sell goods on principle’s 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 price2. 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 Seller
Right of Lien
A. 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 Transit
B. 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 LienVs.
Right of Stoppage in Transit
Right 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 seller has actual possession of goods.
Can be exercised if goods are in transit.
Right ends with parting of possession of goods.
Right ends with actual possession by buyer.
Right of lien is to retain possession. Right of lien is to regain possession.
Right of Re-sale
C. 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
Right of Re-sale
• Right can be exercised under foll. Conditions:– Goods are of perishable nature– Seller gives notice to the buyer of his intentions to
re-sell goods and buyer doesn’t tender price within reasonable time
– Seller has expressly reserved right to resell in case of default by buyer
Right of Re-sale
• If profit is made after re-selling, its retained by seller
• If loss is occurred by re-selling, its recovered from buyer
• If seller expressly reserves right to re-sell, previous contract is rescinded and new contract comes into existence
D. Right of withholding delivery [sec. 46(2)]– When the property is not passed, seller has right to
withhold delivery
E. Other Rights [sec. 55 & 56]– Sue the buyer for the price of the goods [sec.55]– Recover the interest on the amount
Performance of the contract
• Delivery of goods [sec.2(2)]– Voluntary transfer of possession of goods from
one person to another– May be made by doing anything which has effect
of putting goods into possession of Buyer or authorized person
Performance of the contract
• Rules for delivery of goods:1. Actual delivery2. Symbolic or constructive delivery• Doing such act which amounts to handing over the
goods e.g. Handing over docs related to bill of lading, railway receipt etc.
a) Delivery to be made to buyerb) Part delivery
3. Buyer to apply for delivery4. Mode of delivery
5. Mode of delivery6. Place of delivery
1. Goods sold-Place of contract2. Goods agreed to be sold-Place of agreement to
sell3. Goods not then in existence-Mfg. plant/premise
7. Time of delivery
8. Demand at reasonable hour9. Goods in possession of third person10.Expenses11.Installment delivery12.Goods delivered at distant place
• Acceptance of goods by the buyer:1. Examining goods2. When accepted?• Buyers intimates seller of such acceptance• Does any act which is deemed acceptance• Lapse of reasonable time
3. Buyer not bound to return rejected goods
Thank You
