SALE OF GOODS ACT, 1930

It extends to the whole of India except the State of Jammu and Kashmir

It shall come into force on the 1st day of July, 1930.

Terms used in Chapter

(1) “Buyer” means a person who buys or agrees to buy goods;

(2) “Delivery” means voluntary transfer of possession from one person to another;

(3) “Document of title to goods” includes a bill of lading, dockwarrant, warehouse keeper’s certificate,
wharfingers’ certificate, railway receipt,

(5) “Fault” means wrongful act or default;

(6) “Future goods” means goods to be manufactured or produced or acquired by the seller after the
making of the contract of sale;

(7) “Goods” means every kind of moveable property other than actionable claims and money; and
includes stock and shares, growing crops, grass, and things attached to or forming part of the land which
are agreed to be severed before sale or under the contract of sale;

(11) “Property” means the general property in goods, and not merely a special property;

(13) “Seller” means a person who sells or agrees to sell goods;

(14) “Specific goods” means goods identified and agreed upon at the time a contract of sale is made.
Conditions and Warranty
The condition is a fundamental precondition on the basis of which the whole contract is
based upon, on the other hand, warranty is the written guarantee wherein the seller
commits to repair or replace the product in case of any fault in the product.

 Section 11 to 17 of the Sale of Goods Act enlightens the provisions relating to Conditions
and Warranties.

Kinds of conditions 

Expressed Condition 
The dictionary meaning of the term is defined as a statement in a legal agreement that says something must be done or exist in the contract.

The conditions which are imperative to the functioning of the contract and are inserted into the contract at the will of both the parties are said to be
expressed conditions. 

Implied Condition
There are several implied conditions which are assumed by the parties in different kinds of contracts of sale.

Say for example the assumption during sale by description or sale by sample. Implied conditions are described in  Section 14 to 17 of the Sale of Goods
Act, 1930. Unless otherwise agreed, these implied conditions are assumed by the parties as if it is incorporated in the contract itself. Let’s study these
conditions briefly:

 Implied condition as to title

In every contract of sale, the basic yet essential implied conditions on the part of the seller are that-

1. Firstly, he has the title to sell the goods.

2. Secondly, in case of an agreement to sell, he will have the right to sell the goods at the time of performing the contract.  
Consequently, if the seller has no title to sell the given goods, the buyer may refuse or reject those goods. He is also entitled to recover the full price paid
by him. 

In Rowland v. Divall (1923), the party bought a second-hand motor car from the former and paid for the same. After six months, he was deprived of it as
the seller had no title to sell the car. It was held that the aggrieved party is entitled to recover the money. 

 Implied condition as to the description

Moving to  Section 15 of the Act, In the contract of sale, there is an implied condition that the goods should be in conformity with the description. The
buyer has the option to either accept or reject the goods which do not conform with the description of the good. Say for example: Where Ram buys a new
car which he thinks to be new from “B” and the car is not new. Ram’ can reject the car. 

Referring to Section 16(2) of the given Act, goods must be of merchantable quality. In other words, the goods are of such quality that would be accepted
by a reasonable person. For eg: A purchased sugar sack from B which was damaged by ants. The condition of merchantability is broken here and it is
unfit for use. It must be noted from this section that the buyer has the right to examine the goods before accepting it. But a mere opportunity without an
actual examination would not suffice to deprive the buyer of his rights. If however, the examination does not reveal the defect but within a reasonable
time period the goods are found to be defective, He may repudiate the contract even if he approves the goods.

The implied conditions especially in case of eatables must be wholesome and sound and reasonably fit for the purpose for which they are purchased. For
eg: Amit purchases milk that contains typhoid germs and because of its consumption he dies. His wife can claim damages. 

 Implied condition as to sale by sample

In the light of Section 17 of the Act, in a contract of sale by sample, there may be following implied conditions:

1. That the actual products would correspond with the sample with respect to the quality, size, colour etc. 
2. That the buyer gets a reasonable opportunity to compare the goods with the sample. 
3. Further, the goods are free from any defect rendering them unmerchantable. 
For example, A company sold certain shoes made of a special kind of sole by sample sale for the French Army. Later when the bulk was delivered it was
found that they were not made from the same sole. The buyer was entitled to the refund of the price and damages. 

 Implied condition as to Sale by sample as well as a description

Referring to Section 15 of the Sale of Goods Act, 1930, in a sale by sample as well as description, the goods supplied must be in accordance with both the
sample as well as the description. In Nichol v. Godis(1854),  there was a sale of foreign refined rape-oil. The delivered oil was the same as the sample
but it was having a mixture of other oil too. It was held in this case that the seller was liable to refund the amount paid. 

Warranty 
Warranty is the additional stipulation and a written guarantee that is collateral to the main purpose of the contract. The effect of a breach of a warranty is
that the aggrieved party cannot repudiate the whole contract however, can claim for the damages. Unlike in the case of breach of condition, in the breach
of warranty, the buyer cannot treat the goods as repudiated.  

Kinds of Warranty

Expressed Warranty 
The warranties which are generally agreed by both the parties and are inserted in the contract, it is said to be expressed warranties. 

Implied Warranty
Implied warranties are those warranties which the parties assumed to have been incorporated in the contract of sale despite the fact that the parties have
not specifically included them in the contract. Subject to the contract, the following are the implied warranties in the contract of sale:

 Warranty as to undisturbed possession

Section 14(2) of the given Act provides that there is an implied warranty that the buyer shall enjoy the uninterrupted possession of goods. As a matter of
fact, if the buyer having got possession of the goods, is later disturbed at any point, he can sue the seller for the breach of warranty. 

For eg: ‘X’ purchased a second-hand bike from ‘Y’. Unknown to the fact that the bike was a stolen one, he used the bike. Later, he was compelled to
return the same. X is entitled to sue Y for the breach of warranty.

 Warranty as to freedom from Encumbrances

In  Section 14(3), there is an implied warranty that the goods shall be free from any charge or encumbrances that are in favour of any third party not
known to the buyer. But if it is proved that the buyer is known to the fact at the time of entering into the contract, he will not be entitled to any claim.

For eg: A pledges his goods with C for a loan of Rs. 20000 and promises him to give the possession. Later on,  A sells those goods to B. B is entitled to
claim the damages if he suffers any.  

 Implied warranty to disclose Dangerous nature of the goods sold

If the goods sold are inherently dangerous or likely to be dangerous and the buyer is not aware of the fact, it is the duty of the seller to warn the buyer
for the probable danger. If there would be a breach of this warranty, the seller will be liable. 

For eg: A purchases a horse from B if the horse is violent and then It is the duty of the seller to inform A about the probable danger. While riding the
horse, A was inflicted with serious injuries. A is entitled to claim damages from B.

Difference between Condition and Warranty

BASIS FOR COMPARISON CONDITION WARRANTY

It is a stipulation which forms the very It is additional stipulation complementary to the

Meaning
basis of the contract. main purpose of the contract.

Section 12(2) of the Sale of Goods Act, Section 12(3) of the Sale of Goods Act, 1930 defines
Provision
1930 defines Condition. Condition.

Condition is basic for the formulation of

Purpose It is a written guarantee for assuring the party.
the contract.

Result of Breach of Contract The whole contract may be treated as Only damages can be claimed in case of a breach.
 repudiated.

Remedies available to the Repudiation, as well as damages, can be

Only damages can be claimed.
aggrieved party claimed.

FORMATION OF THE CONTRACT

Sale and agreement to sell.—(1) A contract of sale of goods is a contract whereby the seller transfers or
agrees to transfer the property in goods to the buyer for a price.

(2) A contract of sale may be absolute or conditional.

(4) An agreement to, sell becomes a sale when the time elapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred.

Auction Sale

An auction sale is a public sale.

The goods are sold to all members of the public at large who are assembled in one place for
the auction. Such interested buyers are the bidders.

The price they are offering for the goods is the bid.

And the goods will be sold to the bidder with the highest bid.

Different Types of Auction Sales

1. Private Auction: This is an auction sale where the seller and buyers
are known to each other.

2. Advertisement Auction: In this type of auction, the seller publishes a

notice in newspapers or online about the product he wishes to sell through
auction.

3. Sealed Bid Auction: In this type of auction, potential buyers send their
bids to the seller in sealed envelopes. The highest bidder wins the product at
the end of the bidding process.
4. Live Auction: This is an auction sale where bidders participate live
either by attending physically or participating through phone or the internet.

5. Sale in lots: Auction Sale where the items are sold in lots or batches.

6. Auction Sale of Unsold Lots: In this kind of Auction, the seller

offers only those lots that he has not been able to sell in first or
second lot auctions to interested bidders during an auction sale process.

BASIS FOR COMPARISON SALE AGREEMENT TO SELL

Meaning When in a contract of sale, the exchange of When in a contract of sale the parties to contract agree
goods for money consideration takes place to exchange the goods for a price at a future specified
immediately, it is known as Sale. date is known as an Agreement to Sell.

Nature Absolute Conditional

Type of Contract Executed Contract Executory Contract

Transfer of risk Yes No

Title In sale, the title of goods transfers to the buyer In an agreement to sell, the title of goods remains with
with the transfer of goods. the seller as there is no transfer of goods.

Right to sell Buyer Seller

Consequences of Responsibility of buyer Responsibility of seller

subsequent loss or damage
to the goods

Tax VAT is charged at the time of sale. No tax is levied.

Suit for breach of contract by The buyer can claim damages from the seller Here the buyer has the right to claim damages only.
the seller and proprietary remedy from the party to whom
the goods are sold.

Right of unpaid seller Right to sue for the price. Right to sue for damages.
Rights  of an Unpaid Seller 

A person who has sold goods to another person but has not been paid for
the goods or been paid partially is called an unpaid seller .According to
section 45 of Sale of goods act An unpaid seller  is one who has been given a
negotiable instrument like a bill of exchange that has been dishonoured .

1. Rights Against the goods

2. Rights Against the buyer of goods 

Rights against buyer

1- Suit for the price
When any goods are passed on to the buyer and the buyer has wrongfully neglected or refused to pay as per the terms and conditions of the contract,
the seller may sue him as per the Section 55(1) because once the property has been passed the buyer is bound to pay the price.

But in the case due date of payment has been passed and goods had not been delivered yet, the seller can sue the buyer for the wrongful neglect or
refusal on his part according to clause 2 of Section 55.

In case the price is due in foreign currency the damages must be calculated at the rate of exchange prevailing at the time when the price was due not on
the judgement date.

2- Suit for damages

In case there is a wrongful refusal on the part of buyer for acceptance of goods and payment of money, the seller can sue him for damages of non-
acceptance as per Section 56. For calculating the quantum of damages Section 73 and 74 of the Indian Contract Act applies.

In case the goods have a ready market, the seller has to resell the goods and buyer have to pay the losses if incurred. If the seller does not resell the
goods the difference between contract and market price at the day of breach is taken as a measure for damages. If the difference between them is nil
seller gets nominal value.

There is a duty of mitigation on the part of the seller, which means that injured has to make reasonable efforts to minimise the loss from that breach.  For
instance, if the seller can resale the goods, the difference in price in contract and resale price is given to the seller but if the seller deliberately refuses to
resale the goods and its market value reduces then the buyer will not be liable for the exaggerated loss.

The nature of the duty of mitigation has been explained by the supreme court in case of  M. Lachia Shetty V Coffee Board, where, a dealer who bid at an
auction of coffee had been accepted, refused to carry out the contract, consequently, coffee was reauctioned at next best bidding price and dealer who
refused the bid have to give the difference in the amount of loss to the board.

3- Suit for interest

As stated under Section 61, where there is a specific agreement between buyer and seller with regards to interest on the price of goods from the date on
which payment becomes due, the seller may recover interest from a buyer. But if there were no such agreement the seller may charge interest from the
day he notifies the buyer.

If there is no contract to the contrary, the court of law may award interest to the seller at such rate as it thinks fit on the amount of the price from the
date on which amount is payable.

4- Repudiation of the contract before the due date

According to Section 60, the rule of anticipatory breach contract applies, wherein, if buyer repudiates the contract before the date of delivery the seller
can consider the contract as rescinded and can sue for damages of the breach.

According to this Section, if one party repudiates before due date other has two courses of action. Either he may immediately accept the breach and bring
the action of damages the contract is rescinded and damages will be assessed according to the prices then prevailing or he can wait for the date of
delivery. In the second case, the contract is open at risk and will be a benefit to both parties. May be the party changes is mind and agree to perform and
damages will be assessed according to prices on the day of delivery.
Rights Against the Goods (Section 46)
According to Section 47 ,if the seller of goods has not been paid and the ownership of
goods has been transferred to the buyer but the goods are in the possession of the seller
,the seller has the right to retain the good .

Rights Against the Goods (Section 46)

When the buyer has not paid the full or partial price of goods supplied to him
, the seller has the following rights with regard to the goods .

a. Rights of lien 

b. Rights of Stoppage of goods in transit 

c. Right of resale 

A. Rights of lien (Section 47-49)

Lien is the right to retain possession of goods until payment in respect of
them is paid. According to Section 47 ,if the seller of goods has not been paid
and the ownership of goods has been transferred to the buyer but the goods
are in the possession of the seller ,the seller has the right to retain the good .

The seller has this right when the goods have not been sold on credit . When
the payment has not been made on the promised date and when the buyer
has become an insolvent .

Termination of Lien 
According to section 49 the lien of an unpaid seller terminates in the
following circumstances.
 1. When the seller delivers the goods to a carrier for the purpose of
transmission to the buyer .

2. When the seller has waived his lien on the goods.

B. Rights of Stoppage of Goods in Transit (Section 50-52)

The seller has the right of stoppage of goods in transit in following
circumstances :

1. The seller must be unpaid .

2. When the goods are in transit.

Duration of Transit - According to Section 51, when the seller has delivered
the goods to the carrier for transmission to the buyer , until the goods are
received by the buyer or his agent is the duration of transit .

The Carrier may Hold the Goods - 

1. A seller’s agent , In this case , there is no transit because the goods are
under the seller’s lien .

2. As buyer’s agent .In this case the seller cannot exercise his right of
stoppage in transit because the buyer has acquired possession 

3. As an independent contractor .In this case the seller has and can
exercise the right of stoppage in transit , it is not necessary that the
goods should be actually moving .

The Transit Can End if :

 1. If the buyer or his representative obtains delivery of the items prior to
their arrival at the agreed-upon location.

2. If after the arrival of the goods at the appointed destination ,the carrier
or other acknowledges to the buyer or his agent that he holds on his
behalf.

3. If the carrier or other  party refuses to deliver the goods to the buyer or
his representative for any reason.

Rights of Re- sale (Section 54)

A vendor who has not been paid has the right to resell the items. The general
criteria for the resale of goods by an unpaid seller are defined in Section 54.
The following are the main guidelines:

1. The unpaid seller may re -sell the goods if the goods are perishable .

2. When the unpaid seller has acquired the possession of goods by virtue
of lien or stoppage in transit and has given notice to the buyer of his
intention to re-sell.

CAVEAT EMPTOR
The phrase “caveat emptor” is Latin for “let the buyer beware.”

The principle that the buyer alone is responsible for checking the quality

Let us see an example.

 A bought a horse from B. A wanted to enter the horse in a race. Turns out the horse was not capable
of running a race on account of being lame. But A did not inform B of his intentions. So B will not
be responsible for the defects of the horse. The Doctrine of Caveat Emptor will apply.

However, the buyer can shift the responsibility to the seller if the three following conditions are fulfilled.

 if the buyer shares with the seller his purpose for the purchase
 the buyer relies on the knowledge and/or technical expertise of the seller
 and the seller sells such goods

Exceptions to the Doctrine of Caveat Emptor

The doctrine of caveat emptor has certain specific exceptions. Let us take a brief look at these exceptions.

1] Fitness of Product for the Buyer’s Purpose

When the buyer informs the seller of his purpose of buying the goods, it is implied that he is relying on the
seller’s judgment. It is the duty of the seller then to ensure the goods match their desired usage.

Say for example A goes to B to buy a bicycle. He informs B he wants to use the cycle for mountain trekking.
If B sells him an ordinary bicycle that is incapable of fulfilling A’s purpose the seller will be responsible.
Another example is the case study of Priest v. Last.

2] Goods Purchased under Brand Name

When the buyer buys a product under a trade name or a branded product the seller cannot be held responsible
for the usefulness or quality of the product. So there is no implied condition that the goods will be fit for the
purpose the buyer intended.

3] Goods sold by Description

When the buyer buys the goods based only on the description there will be an exception. If the goods do not
match the description then in such a case the seller will be responsible for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The sections state that the seller who is
selling goods by description has a duty of providing goods of merchantable quality, i.e. capable of passing
the market standards.

So if the goods are not of marketable quality then the buyer will not be the one who is responsible. It will be
the seller’s responsibility. However if the buyer has had a reasonable chance to examine the product, then this
exception will not apply.
5] Sale by Sample
If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat Emptor will not
apply. If the rest of the goods do not resemble the sample, the buyer cannot be held responsible. In this case,
the seller will be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where the car is red. The rest of
the cars turn out orange. Here the doctrine will not apply and B will be responsible.

6] Sale by Description and Sample

If the sale is done via a sample as well as a description of the product, the buyer will not be responsible if the
goods do not resemble the sample and/or the description. Then the responsibility will fall squarely on the
seller.

7] Usage of Trade
There is an implied condition or warranty about the quality or the fitness of goods/products. But if a seller
deviated from this then the rules of caveat emptor cease to apply. For example, A bought goods from B in an
auction of the contents of a ship. But B did not inform A the contents were sea damaged, and so the rules of
the doctrine will not apply here.

8] Fraud or Misrepresentation by the Seller

This is another important exception. If the seller obtains the consent of the buyer by fraud then caveat emptor
will not apply. Also if the seller conceals any material defects of the goods which are later discovered on
closer examination then again the buyer will not be responsible. In both cases, the seller will be the guilty
party.