Sales of Goods Act, 1930

Indian Sale of Goods Act 1930 is a Mercantile Law. The Sale of Goods Act is a kind of Indian
Contract Act. It came into existence on 1 July 1930. It is a contract whereby the seller transfers or
agrees to transfer the title (ownership) in the goods to the buyer for consideration. It is applicable all
over India, except Jammu and Kashmir. The goods are sold from owner to buyer for a certain price
and at a given period of time.
 In 1930, Sections 76 to 123 of the Contract Act was repealed and a separate Act known as the Sale
of Goods Act, 1930 was passed.

 The law relating to sale and purchase of goods, prior to 1930 were dealt by the Indian Contract Act,
1872.

Contract of sale (two types)

 Sale (Transfer of ownership)

 Agreement to sell (Future sale)

Essentials of contract of sale

 Buyer A person who buys or agrees to buy goods.

 Seller A person who sells or agrees to sell goods.
 Goods Every kind of movable property other than actionable things and money.
 Existing goods Goods which are in existence at the time of contract of sale.
 Future goods Goods which are to be manufactured /produced by seller after making
contract of sale.
 Specific goods Goods which are identified & agreed upon at the time of contract of sale has
been made..
 Price: The consideration for the contract of sale called price must be money.

 Transfer of general property: The object of the contract must be the transfer of general
property as distinguished from the special property in the goods by one person to another.
The term ‘general property’ refers to ownership of goods.

Goods:
The subject matter of a contract of a sale must be goods .According to Section 2(7) the term ‘goods’
means “every kind of movable property other than actionable claims and money and includes stock
and shares, growing crops, and things attached to or forming part of the land which are agreed to be
severed before sale or under the contract of sale” Specific Types of goods:
 Exiting goods
 Future goods Unascertained
 Contingent goods

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 may be-

 Specific goods: Goods identified and agreed upon at the time of making of the contract of
sale of goods.
 Ascertained goods: Goods identified subsequent to the formation of the contract of sale.
The terms ascertained and specific, are commonly used for same kind of goods.
 Unascertained or generic goods: Goods not identified or agreed upon at the time of making
of the contract of sale. They are the goods defined for description only.
Future goods: Goods to be manufactured, produced or acquired after making of the contract are
called future goods. Example: ‘A’ contract, on 1st January, to sell B 50 shares in Reliance Ltd., to be
delivered and paid for on the 1st March of the same year. At the time of making of the contract, A is
not in possession of any shares. The contract is a contract for the sale of future goods.

Contingent goods: Goods, the acquisition of which by the seller depends upon an uncertain
contingency are called ‘contingent goods’. They are also a type of future goods. Example: ‘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.

Transfer of Property in Goods

The property in the goods is said, to be transferred from the seller to the buyer when the latter
acquires the proprietary rights over the goods and the obligations linked thereto. 'Property in Goods'
which means the ownership of goods, is different from ' possession of goods' which means the
physical custody or control of the goods.
The transfer of property in the goods from the seller to the buyer is the essence of a contract of sale.
Therefore the moment when the property in goods passes from the seller to the buyer is significant for
following reasons:

 Ownership -- The moment the property in goods passes, the seller ceases to be their owner
and the buyer acquires the ownership. The buyer can exercise the proprietary rights over the
goods. For example, the buyer may sue the seller for non-delivery of the goods or when the
seller has resold the goods, etc.

 Risk follows ownership -- The general rule is that the risk follows the ownership,
irrespective of whether the delivery has been made or not. If the goods are damaged or
destroyed, the loss shall be borne by the person who was the owner of the goods at the time
of damage or destruction. Thus the risk of loss prima facie is in the person in whom the
property is.

 Action Against Third parties -- When the goods are in any way damaged or destroyed by
the action of third parties, it is only the owner of the goods who can take action against them.

 Suit for Price - The seller can sue the buyer for the price, unless otherwise agreed, only after
the goods have become the property of the buyer.

Insolvency - In the event of insolvency of either the seller or the buyer, the question whether
the goods can be taken over by the Official Receiver or Assignee, will depend on whether the
property in goods is with the party who has become insolvent.

Essentials for Transfer of Property

 Goods must be ascertained: Unless the goods are ascertained, they (or the property
therein) cannot pass from the seller to the buyer. Thus, 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 to PASS Property in Goods must be there: In a sale of specific or ascertained

goods the property in them is transferred to the buyer at such time as the parties to the
contract intend it to be regard shall be had to the terms of the contract, the conduct of the
parties and the circumstances of the case.
 Remedies for breach of contract of sale.

The sales of goods Act gives the following remedies to a seller and a buyer for breach of contract of
sale.

Seller’s Suit.

 Suit for price.(Sec-55)

 Suit for damages for non-acceptance of the goods(Sec-56)
 Suit for Repudiation of contract before due date.(60)
 Suit for interest.Sec-61)

Buyer’s Suit

 Suit for damages for non-delivery of the goods(Sec-57)

 Suit for specific performance(Sec-58)
 Suit for breach of warranties (59)
 Suit for damages of Repudiation of contract by the seller before due date.(60)
 Suit for interest.Sec-61)

RIGHTS OF UNPAID SELLER

Unpaid seller

Seller: - A person who sells the goods or agrees to sell the goods is called seller.

Unpaid: - It means payment is not made or without payment. In simple words, "Unpaid seller" means
a person who has sold the goods for a price but price has not been paid to him. Sales act defines the
"unpaid seller" in the following words: Unpaid Seller Is a Person:-

 To whom the whole price has not been paid or tendered.

 And where a bill of exchange or other negotiable instruments has been accepted by him as a
condition on which it was received has not been fulfilled by reason of dishonour of the
instrument or otherwise.
 Example: Party A sells a car on cash basis to party B and the price has not been received yet.

Rights of unpaid seller Right against goods.

Right of lien:

The right of lien means lawfully right to retain the goods possession until the full price is received. An
unpaid seller can exercise his right of lien in following cases.( Sec 47-49)

 The goods have been sold without any stipulation as to credit.

 The goods have been sold on credits, but the term of credit has expired.
 The buyer becomes insolvent.

Right of stoppage in transit:

 Duration of transit.
 When transit comes to an end.

Right to resale:
If a buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to
resell the goods in the following circumstances.

 Where the goods are of perishable nature.

 Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a
notice to buyer of his intension of resell the goods.
 Where the unpaid seller has expressly reserved his right of resale.
 Where seller gives notice to the buyer of his intension to resell and the buyer does not pay
within a reasonable time,

Right of an unpaid seller against the buyer personally

 Suit for price.

 Suit for damages for non acceptance.
 Repudiation of contract before due date.
 Suit for special damage.
 Suit for interest.

Other rules to satisfy the conditions for this right are:

II. The unpaid seller must be in actual possession of the goods sold.

III. It can be exercised even If the documents of title have been delivered to the buyer.

IV. It can be exercised for the price and not for other expenses.

V. If the seller delivers some goods, it can be exercised on the remaining Termination of right of lien
Seller’s right of lien is terminated in following cases.1. When he delivers the goods to the carrier or
other bailey for transmission to the buyer

Right of stoppage in transit [Sec. 50 to 52] It means stoppage of goods while they are in transit to
take possession until the price is paid (sec.50-52)

Unpaid seller can stop the goods in transit in the following cases.

1. While the buyer becomes insolvent.

2. While the goods are out of actual possession of seller, but have not reached buyer’s possession
i.e. goods are in transit with career.

3. The unpaid seller can stop the goods in transit only for payment of the price of the goods and not
for any other charges.

The unpaid seller cannot stop goods in transit in following cases.

1. When the goods reaches the destination.

2. While the buyer or his agent takes possession of delivery even if it is not reached destination.

3. In case the carrier is agent of the buyer, the transit comes to an end the instance carrier receives
the goods and seller cannot stop the transition.

4. Carrier’s wrongful refusal to deliver goods to the buyer Example:”A” sells TV set to “B”. “A” delivers
the TV to the carrier to carry it to “B”. Later on gets news that “B” has become insolvent;“A” can stop
delivery.
 CONDITIONS AND WARRANTIES.

Condition:

A condition is 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. [Sec 12(2)

Warranty:

A warranty is a stipulation collateral to the main purpose of the contract, breach of which gives rise to
a claim for damages, but not a right to reject the goods and treat the contract as repudiated. [Sec
12(3)

When condition to be treated as warranty [Sec.13]

 Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may
waive the condition or elect to treat the breach of the condition as a breach of warranty.
[Section 13(1)].
 Where a contract of sale is not severable and the buyer has accepted the goods or part
thereof, the breach of any condition to be fulfilled by the seller can only be treated as a
breach of warranty, unless there is a term of the contract, express or implied, to that effect.
[Section 13(2)].
 Nothing in this section shall affect the case of any condition or warranty fulfilment of which is
excused by law by reason of impossibility or otherwise. [Section 13(3)].

Case study: Jones vs. Padgett The buyer bought cloth for making uniforms. However, the seller was
not aware of the purpose of buying the cloth. Later, the buyer found that the cloth is not fit for making
uniforms. It was, however, fit for other normal purposes. The seller was not found guilty as the
principle of ‘caveat emptor’ applied in this case. 49 The buyer and seller have equal access to
information about the item and the buyer is able to make personal inspection Example: Suppose Ram
bought 10 cows from a cattle broker. Out of those 10, 2 cows had defects. However, Ram did not
know this because he didn’t check all 10 cows though he paid for them. Guess what happened? The
2 infected cows died within three days of the purchase. Now, as there was no tacit condition that the
cows would be in great health at the time of the sale, Ram cannot hold the cattle broker as
responsible or having sold him those infected cows. It was Rams basic duty to check the health of
those cows and not expect the cattle broker to state all the defects.

Sale of goods by description.

Where the goods are purchased by description from a seller, who deals in such class of goods, there
will be an implied condition that the goods shall be of merchantable quality.

Implied condition as to quality or fitness.

Where the buyer has made know to the seller the purpose for which he requires the goods and
depends on the seller’s skill and judgment, there is an implied condition that the seller will supply the
goods which are fit for that purpose. Section 16(1)

Example: A buys a black yarn from B and finds that it has been damaged by white ants. The condition
as to merchantable quality is broken and therefore, the doctrine of broken and therefore, the doctrine
of caveat emptor does not hold good. EXCEPTION OF CAVEAT EMPTOR

Usage of trade

An implied condition or warranty as to quality or fitness for a particular purpose may be annexed by
the usage of trade and if the seller deviates from that, the rule of caveat emptor does not hold good.
Example: A dealer sells a refrigerator to Mohit. The refrigerator performs all other functions except
making ice. This would amount to breach of an implied condition and thus the doctrine of caveat
emptor will not work.

Example: English sainfoin seeds, duly exhibited by a sample, are sold. The bulk corresponds to the
sample but the seeds supplied are giant sainfoins and not English sainfoin. There is a breach of
condition as to description of goods. So the doctrine of caveat emptor is not applicable.

Consent by fraud.

When the buyer relies on false representation of the seller and suffers damages, i.e., in a contract
where the buyer’s consent was obtained by the seller by fraud, the doctrine of caveat emptor will not
hold well.

Example: A bought 3000 tins of preserved milk from U.S.A. The tins were labelled in such a way as to
infringe the Nestles trademark. As a result, they were detained by the custom authorities. To get the
clearance certificate from the customs, A had to remove the labels and sell them at a loss. Now A can
hold the seller responsible for fraud and claim damages.

Auction of sale

Where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate
contract of sale;

MEANING: Sale of auction is the public sale where the goods are generally sold to the highest bidder
Rules of auction sale: The law on auction sales is contained in Sec.64 of the Sale of Goods Act.
According to it, in the case of a sale of auction the following rules apply:

Where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful
for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer
knowingly to take any bid from the seller or any such person; A right to bid may be reserved expressly
by or on behalf of the seller and, where such right is expressly so re-served, but not otherwise, the
seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the
auction; The sale is complete when the auctioneer announces its completion by the fall of the
hammer or in other customary manner; and, until such announcement is made, any bidder may
retract his bid.

If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the
buyer. The sale may be notified to be subject to a reserved or upset price, and any sale contravening
this rule may be treated as fraudulent by the buyer.

Conditions & warranties (Section14 to17deals with implied conditions and warranties.)

What is condition?

A condition is a stipulation essential to the main purpose of the contract, the breach of which gives
right to repudiate the contract and to claim damages. Example: Paltu goes to Remo, a horse dealer,
and says, I want a horse which can run at a speed of 30 km. per hour. The horse dealer points out a
particular horse and says, this will suit you. Paltu buys the horse. Later on Paltu finds that the horse
can run only at a speed of 20km. /hr. there is a breach of condition, Paltu can repudiate the contract,
return the horse to Remo and get back the price.

What are implied conditions?

• implied conditions are those, which are presumed by law to be present in the contract.
• implied condition may be null and void or waived by an express agreement.

1. Condition as to title.
2. Sale by description
3. Sale by sample
4. Sale by sample as well as description
5. Condition as to quality or fitness
6. Condition as to wholesomeness

Condition and warranty distinguished [SEC.12 (2)(3)]

Condition

 It is essential to the main purpose of the contract.

 The aggrieved party have a right to repudiate the contract and claim for damages.
 This can be treated as a breach of warranty.

Warranty

 It is collateral to the main purpose of the contract.

 The aggrieved party have a right to claim for damages only.
 This cannot be treated as a breach of condition.

What is warranty?

A warranty is a stipulation collateral to the purpose of the contract, the breach of which gives the
aggrieved party a right to sue for damages only, and not to avoid the contract.

Example: Assume that a farmer, intending to plant no-till soybeans, approaches a seller to buy
herbicide. Assume further that the buyer requests a particular herbicide mix but the seller suggests a
less expensive mix. if the chemicals fail to kill crabgrass and the farmer has a low yield of soybeans,
the farmer could sue the seller for breach of the warranty of fitness for a particular purpose because
the seller knew what the farmer required.

Breach of warranty (SEC.13)

 When buyer waives the performance of the condition.

 When buyer elects to treat breach of the condition as breach of warranty and does not treat
the contract as void.
 When the contract of sale is inseparable and the buyer has accepted the whole goods or part
thereof.
 When the fulfilment of any condition or warranty is executed by law by reason of impossibility
or otherwise.

Which are warranties implied?

 Warranty as to quiet possession.

 Warranty as to goods to be free from encumbrances.

Types of condition and warranty

A) Express condition and warranty :

When both the buyer and seller agree to provide for certain Terms and conditions, either by
words spoken And written, they are known as express condition and warranty .
B) Implied condition and warranty:
It is open to the parties to include in their contract any number of express conditions and
warranties. But in addition to what the contract may provide, the law implies into every sale of
goods a number of conditions and warranties. They are read into every contract of sale
unless they are expressly excluded. These are called as implied conditions and warranties.