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Summary

Sale of Goods Act, 1930

The Sale of Goods Act involves Preliminary/ Introduction, Contract of Sales, Conditions and
Warranties, Effects of the Contract- passing of Property; Unpaid Seller and Suit for Breach of
Contracts and Auction Sales.

The law as to the sale of goods was originally embodied in sections 76 to 123 of Indian
Contract Act, 1872. Since they were found to be inadequate to meet the complexities of
growing mercantile transactions, the sales of goods act, 1930 was enacted.

The Sale of Goods Act applies only to movables other than actionable claims and money and
not to immovables which are governed by the Transfer of Property Act, 1882

Goods are defined and types of goods such as existing goods 9 specific goods and
unascertained or generic goods) and specific goods are described. Document of title of goods
include bill of lading, dock warrant, warehouse keeper’s certificate, wharfinger’s certificate,
railway receipt, warrant or order of the delivery of goods etc. Property means general
property in goods and not merely a special property.

Where under a sale the property in the goods is transferred from seller to buyer, the contract
is called a ‘sale’. Essentials of sale are there should be transfer of general property in the
movable goods at a price between two parties who are competent to contract in writing or by
word of mouth. Where the transfer of property is to take place at a future date or subject to
some conditions to be fulfilled, the contract is said to to be an agreement to sell. The
differentiation between sale and agreement to sale are- the sale is an ‘executed contract’
while agreement to sale is ‘executory contract’; sale creates right on the goods against the
whole world while agreement to sale creates a personal right against the person for any
default in fulfilling his part of agreement; ain sale the property passes to the buyer while in
agreement to sale the property does not pass to the buyer immediately; in case of breach of
contract in sale, the seller is entitled to sue for the price of the goods and also has a right of
lien, stoppage –in-transit and resale while in an agreement to sale the seller has the right to
sue for damages for non- performance of contract; in case of loss of goods, in sale, the loss is
born by the buyer, while in agreement to sale the seller will have to pay for loss.

Contract of sale involves offer and acceptance, delivery, price, goods (existing or future) and
all the essentials of an ordinary contract.

In case of hire- purchase agreement, unless the full price of goods is paid, the ownership of
the goods remains with the seller. It is both a contract of bailment and an agreement to sell.
Differentiation between ‘agreement to sell’ and ‘hire-purchase agreement’ is discussed

Under section(7) and (8) goods perishing- effects of distribution of goods – goods perishing
before making of contract and goods perishing before sale, but after agreement to sell are
discussed.
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A condition is a stipulation essential to the main purpose of the contract, breach of which
gives rise to a right to treat the contract as repudiated or broken. 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 to a right to reject the goods and treat the contract as repudiated or broken.
Stipulations as to time, except as regards time of payment are usually the essence of the
contract. Breach of condition may be treated as a breach of warranty. A breach of warranty
cannot be treated as a breach of condition. A breach of condition would be held as breach of
warranty only under (Sec. 13)- where the buyer elects to treat breach of condition as breach
of warranty, where the buyer waives the condition, unless there is expressed or implied
contract to the contrary. Remedies to the buyer on breach of condition are: repudiate the
contract and reject the goods; elect to treat the breach of condition as breach of warranty,
waive the condition; treat the contract as rescinded and sue for damages for the breach. In
case of breach of warranty by the seller remedies to the buyer are: to file the suit in
diminution or extinction of prices; or claim damages

Implied warranties and conditions in case of warranty as to title, sale by description, sale by
sample sale by sample as well as by description and warranty as to quality or fitness are
discussed.

Caveat emptor means “let the buyer beware”, buyer must take care.
Exceptions: custom or usage of trade- should not be unreasonable, nor inconsistent with the
express terms and conditions; fraud; for specific purpose, the buyer relies on the skill or
judgement of the seller, there is an implied condition that the goods shall be reasonably fit for
the purpose; merchandise quality where the sale is by description and purchased from the
seller who deals in goods of that description, there is an implied condition that the goods shall
of merchantable quality.

Property means general property in goods and not merely a special property. Transfer of
property in the goods is distinct from delivery of goods. Property or ownership in the goods
may pass to the buyer without delivery of the goods. On the other hand mere delivery of the
goods may not constitute transfer of ownership. Section 18 to 26 lay down the rules
determining the time when the ownership of the property passes from the seller to the buyer.
Time when the property passes in specific or ascertained goods, the property in them is
transferred to the buyer as such time as the parties to the contract intend it to be transferred.
In case of specific goods to be deliverable where there is an unconditioned al contract, the
property in the goods passes to the buyer when the contract is made. When specific goods are
to be put in a deliverable state, the seller is bound to do something to the goods for the
purpose of putting them into a deliverable state, the property does not pass until such thing is
done and the buyer has notice thereof.
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When there is a contract for the sale of unascertained goods, no property in the goods passes
to the buyer unless and until the goods are ascertained. Also goods must be unconditionally
appropriated. Property in the goods does not pass to the buyer in case of contract of sale of
specific goods in a deliverable state, where the seller is bound to weigh, measure, test or do
some other act or thing with reference to goods for the purpose of ascertaining the price,
property does not pass until such thing is done and the buyer has notice thereof; where the
seller reserves the right of disposal of goods and where the seller sends the bill of exchange
for acceptance together with the bill of lading, unless he accepts the bill of exchange. Risk
prima facie passes with the property. Exceptions to ‘Risk follows Ownership’ are- where
delivery has been delayed due to fault of buyer or seller, the goods are at the risk of party in
fault; and where parties agree that the risk will follow at a time different from the time when
ownership passes.

As a general rule, no one can sell the goods and give a good title thereof unless he is the
owner thereof. Exceptions to the general rule: sale by non-owners are:

 Title by estoppels -where the owner of the goods by his words/ conduct causes the
buyer to believe that the seller has the authority to sell the goods, he shall be estopped
or precluded from denying the authority of the seller to sell
 Sale by mercantile agent
 Sale by one of the several joint owners
 Sale of goods by a person in possession of goods under a voidable contract
 Sale by seller in possession of after sale- where a person having sold the goods
continues or is in possession of the goods or of the documents of title of the goods,
after the sale, sells, pledges or mortgages or disposes them to any other person, the
buyer shall get a good title to the goods provided he receives goods in good faith and
without notice of the previous sale.
 Sale by buyer in possession after sale
 Sale by an unpaid seller- where he has exercised his right of lien or stoppage in
transit, re-sells the goods, the buyer acquires a good title to the gods

Delivery of goods is voluntary transfer of possession of goods from one person to another. It
may be actual or symbolic ( e.g. handing over of documents related to goods like bill of
lading, railway receipt etc.). T he rules are delivery and payment, delivery to be made to
buyer, part delivery, buyer to apply for delivery, mode of delivery, place of delivery, time of
delivery, demand at reasonable hour, goods in possession of third person, expenses,
instalment delivery and goods delivered at distant place. In case of short delivery, the buyer
may reject the goods delivered; for excess delivery, he may accept goods included in the
contract and reject the rest, or he may reject the whole; and for mixes delivery, the buyer may
accept the goods which are in accordance with the contract and reject the rest, or he may
reject the whole.
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Acceptance of goods by the buyer (Section 41-43) Rules:

 The buyer is not deemed to have accepted the goods unless and until he had a
reasonable opportunity to examine them, for the purpose of ascertaining whether they
are in conformity with the contract.
 The buyer is deemed to have accepted goods when he intimates to the seller that he
has accepted them or if he pledges the goods or sends the goods to his sub-purchaser
or when he resells or he retains the goods for a reasonable time without rejecting
 Buyer not bound to return the rejected goods to the seller

Rights and duties of buyer and seller are discussed. Delivery of the goods to the seller to a
carrier for purpose of transmission whether named by the buyer or not or wharfinger for safe
custody, constitutes delivery of the goods to the buyer unless the seller has made such a
contract on behalf of the buyer that the dlivery must make carrier or wharfinger responsible
for the goods. Where goods are sent by seller to the buyer by a route involving sea transit, the
seller shall give such notice to the buyer as may enable him to insure the goods during sea
transit, if not intimated, goods shall be deemed to be at seller’s risk.

Carriage by sea can be by “cost-insurance-freight” contract or by “free on board “ contract or

ex-ship contract or delivery free on road/ rail and their implications are discussed.

An unpaid seller is one who has not paid or tendered the whole of the price or one who
receives a bill of exchange or other negotiable instruments conditional payment and the
condition on which it was received has not been fulfilled by reason of the dishonour of the
instruments or otherwise.

 Rights of unpaid seller:

When the property of the goods has passed to the buyer:
Lien (general or specific): the unpaid seller of goods, who is in possession of them is
entitled to retain possession of them until payment or tender of the price- where the
goods have been sold without any stipulation as to credit; where the goods have been
sold on credit and the term of credit has expired, and where the buyer becomes
insolvent. Termination of lien occurs for the unpaid seller when he delivers goods to a
carrier or other bailee for the purpose of transmission to the buyer without reserving
the right of disposal of the goods; when the buyer or his agent lawfully obtains
possession of goods and when the seller waives his right of lien
 Stoppage in transit- essentials are the seller must be unpaid wholly or partly; the
buyer must have become insolvent; the goods must be in transit. Transit of goods
come to an end- when the buyer takes delivery of the goods from the carrier or other
bailee, when the buyer or his agent on his behalf obtains delivery of the goods before
their arrival at the appointed destination (by anticipation by the buyer or the seller
exercising his right of stoppage in transit) or when the carrier or bailee on arrival of
the goods at the appointed destination , acknowledges to the buyer / his agent that he
holds the goods on his behalf and continues in possession of them as baillee for the
buyer/ agent
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 Right of Resale: when the unpaid seller has exercised his right of lien on his retaining
the possession of the goods or resumes possession of the goods by exercising his right
of stoppage in transit upon insolvency of the buyer he can resell where the goods are
in perishable nature; where the seller gives notice to the buyer of his intention to re-
sell the goods and the buyer does not pay/ tender the price within a reasonable time
after the notice; where the seller has expressly reserved his right of re-sale in case the
buyer makes default.
 Reservation of right of disposal :

When the property in the goods has not passed to the buyer

 Right of withholding delivery

 Other rights such as sue the buyer for the price of goods, for damages for wrongfully
neglecting or refusing to accept the goods and to recover interest from the buyer
where there is specific agreement to that effect

Remedies for breach of contract of sale

To the seller:

 Suit for price

 Suit for damages

To the buyer:

 Suit for damages for non delivery of the goods

 Suit for specific performance
 Suit for breach of warrant
 Suit for repudiation of contract- anticipatory breach

Common relief: to both buyer and seller

 Interest shall be payable when by law it is recoverable at such rate as the court may
think fir
 Interest may be awarded to buyer/ seller if there is contract, then according to
contract, if no contract as decided by court
 Interest may be awarded under section 80 of teh Negotiable Instruments Act
 Interest prior to suit may be awarded if there is agreement to pay interst at affixed
rate, if it is payable by usage of trade and if irt is payable under the provisions of
substantive law.
 If teh goods are sold on credit, interest will be awarde from the expiry of the credit
 No interest can be recovered on damages
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Auction Sales:

 The sale is complete when the auctioneer announces its completion by the fall of teh
hammer/ other customary manner
 A bidder can withdraw his bid any time before it is accepted by the auctioneer
 Reserve price
 The auctioneer is not bound to sell articles advertised to the highest bidder except
when the sale is with reserve.
 The auctioneer has right to make auction subject to any condition he likes
 There are implied warranties in auction sale regarding his authority to sell; he knows
of no defects in principal’s title and to give quiet and peaceful possession of the goods
against payment of the price.