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Sales of Goods Act 1930
Sales of Goods Act 1930
Sales of Goods Act 1930
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Introduction
It governs transfer of property in goods It does not include transfer of immovable property which is governed by the Transfer of Property Act, 1882. Contract of Sale of Goods is a special contract. As per section 3 of the Sale of Goods Act, the principles of the Contract Act relating to formation of contract, performance of contract, law of damages etc are also applicable to contract of the sale of goods in so far as they are not inconsistent with the express provisions of the Sale of Goods Act
Contract of Sale
A contract of sale of goods is a contract Whereby the seller Transfers or Agrees to Transfer the property / ownership In Goods To the Buyer For a price
Points
Nature
SALE
Executed contract
Agreement to Sell
Executory contract
Transfer to
ownership
transferred
immediately
future time or on
fulfillment of conditions
Conveyance
of property Type of goods
existing goods.
Points
Risk of loss Rights of seller
SALE
Agreement to Sell
risk passes with the the seller is to bear the risk ownership i.e risk of of loss even though the goods buyer are in possession of the buyer if seller is an unpaid If the buyer makes the breach of seller, he can sue the contract the seller can sue the buyer for price + buyer for damages right of lien or stoppage in transit or resale Buyer can sue for the buyer can sue the seller for damages on breach of damages. If the seller resells the goods, the contract. buyer can even sue the 3r party for recovery of the goods.
Rights of buyer
Points
Insolven cy of the buyer. Insolven cy of the Seller.
SALE
Official assignee/receiver can claim the goods because the buyer is the owner of goods. The seller is entitled to ratable dividend for the price only. the buyer can claim the goods from official Assignee/ Receiver. It is because ownership of the goods is with the buyer.
Agreement to Sell
the seller is not bound to deliver the goods unless the full price of the goods is paid to him because the ownership of the goods is still with the seller. If the seller becomes insolvent after agreement to sale, the buyer can claim ratable dividend for the price of the goods if he has already paid
Points
Transfer of ownership Position of parties. Termination of contract
SALE
HIRE PURCHASE
ownership of goods is ownership of goods passes to immediately the hirer when he pays all transferred. the installment of hire. buyer is in the The hirer is in a position of a position of an owner bailee. of goods seller or buyer A hirer has an option to cannot terminate terminate the contract of the contract. If hire at any time. anyone does so, he is liable to pay damages.
Points
Transfer of ownership Return in goods Price
SALE
BAILMENT
ownership of goods is There is only a transfer of immediately possession of goods from a transferred. bailor to a bailee. the buyer does not Bailee is bound to return return goods to the the goods to the bailor when seller purpose of bailment is accomplished A price is paid in may be without money as consideration, consideration. gratuitous bailment. any i.e.
Sale & barter or exchange Sale & gift. Sale & mortgage or pledge
GOODS
Goods means very kind of Movable property Other than actionable claim and money; and Includes stock and shares,
Classification of goods
Sale of Goods
Existing Goods
Future goods
Contingent Goods
Specific Goods
Ascertained Goods
Unascertained Goods
Unascertained or generic goods. The goods, which are not identified and agreed upon at the time of making of contract of sale, are known as unascertained goods. Such goods are indicated or defined by description at the time of contract of sale.
Example: A had ten horses. He agreed to sell one horse to B. in this case, the contract is for sale of unascertained goods as the horse has not been identified at the time of contract of sale.
Ascertained goods.
Generally, the term specific goods and ascertained goods are used for the same kind of goods. But, more specifically, the term ascertained goods is used to denote the goods, which is
manufactured or produced or acquired by the seller after making of the contract of sale. where a contract of sale of future goods is made, it is an agreement to sell & not a sale. It is because the property in the goods can be transferred only at a future date when the goods shall be manufactured or acquired. Example: A, a manufacturer of table fans, contracted to sell 100 fans to B at a certain rate. B agreed to purchase the fan. However, the fans were yet to be manufactured by A. This is an agreement to sell & not sale.
Contingent goods. Contingent goods are the goods, the acquisition of which depends upon the happening or nonhappening of a contingency i.e. contingent event.[Sec.6(2)] Example: P contract to sell 50 pieces of particular article provided the ship which is bringing them reaches the port safely. This is an agreement for the sale of contingent goods.
Goods perishing before sale but after agreement to sell. An agreement to sell goods becomes void if (i)The agreement to sell is for specific goods, (ii)The goods perish subsequent to the agreement to sell the goods is made but before the risk passes to the buyer, and (iii)Goods perish without any fault on the part of the seller or buyer (Sec.8)
(i) Where the seller has knowledge of the destruction of the goods. (ii)Where the contract of sale is not for specific goods but for generic or unascertained goods. Example: A agreed to sell to B 10 bales of Egyptian Cotton out of 100 bales lying in his godown. The goods were already destroyed by fire before the contract of sale. But both A and B did not know about the fire. In this case, the contract is not void as it was not for the sale of specific goods, but for sale of unascertained goods. And thus, A is liable to supply 10 bales to B, or pay him damages for the breach of contract.
c. A reasonable price
However, if the buyer has received and appropriated the goods or any part thereof, he becomes bound to pay reasonable price.
If the third party is prevented from making the valuation by the fault of the seller or the buyer, the innocent party may maintain suit for damages against the party in fault.
STIPULATION
Conditions
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. & non-fulfillment of it defeats the very purpose for which the contract was made
WARRANTIES
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
POINTS
Condition
Warranty
Nature
Significan It is essential to the very It cannot be considered purpose of the contract that as failure to perform ce its non-performance may be the contract. considered as failure to perform the contract. Consequ The aggrieved party may The aggrieved party cannot ence of treat the contract as repudiate the contract but breach repudiated. can claim damages. Treatmen A breach of condition may A breach of warranty t be treated as breach of cannot be treated as warranty. breach of condition.
IMPLIED CONDITIONS
Condition as to title. In a contract of sale, there is an implied condition on the part of the seller that(i)In case of sale, he has a right to sell the goods, and (ii)In case of agreement to sell, he will have a right to sell the goods at the time when the property is to pass.
Condition as to description
Condition as to sample.
Condition as to quality or fitness. General rule is that there is no implied condition as to quality or fitness for any particular purpose of goods supplied
Except:
The buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required. The buyer relies on the sellers skill or judgment.
But the condition of fitness or quality does not apply in the following specific cases, even if the buyer has made known to the seller the purpose for which he is buying: (i) Where the goods sold is a specified article under its patent or other trade mark.(Proviso to Sec.16(1)] This exception is applicable only when the buyer does not rely on the sellers skill and judgment.
IMPLIED WARRANTIES
Warranty as to quiet possession of goods Warranty as to freedom from charge or encumbrance
Transfer of Property in Unascertained or Future Goods The goods must be appropriated to the
contract either by the buyer or by the seller with the consent of the other party. The goods appropriated must be of the same
deliverable state.
The appropriation must be unconditional
Appropriation of Goods: It is a process by which the goods to be delivered under the contract are identified and set apart with the mutual consent of the seller & buyer. It is a bilateral act of the seller and the buyer to identify and set apart the goods Deemed appropriation of goods:. Where the seller delivers the goods to any of the following for the purpose of transmission to the buyer without reserving the right of disposal he is deemed to have unconditionally appropriated the goods to the contract:
to the buyer, To a carrier or to a Bailee.
buyer to believe that the seller of the goods has the authority to sell them
mercantile agent having possession of goods or documents of title ordinary course of business buyer must act in good faith
joint ownership Any one joint owner is in the sole possession The buyer must act in good faith
seller must be in possession of the goods & with the consent of the buyer. NEW buyer must not have notice of the previous sale
unpaid seller seller must be in possession of the goods must have exercised his right lien or stoppage in transit
DELIVERY OF GOODS
Delivery means voluntary transfer of possession of goods Actual delivery: manual transfer Symbolic delivery: seller does something, which has the effect of putting the goods in possession of the buyer Constructive or fictitious delivery or delivery by attornment: when the seller does some act which expresses his intention to transfer property in the goods sold to the
buyer
Deterioration of goods during transit: the buyer shall bear risk of deterioration in the goods necessarily incidental to the course of transit
UNPAID SELLER
The seller of goods is deemed to be an unpaid seller:
When the whole of the price has not been paid or tendered. When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received, has not been fulfilled by reason of the dishonour of the instrument or otherwise
Right of Lien
e. The right of lien can be exercised only when the seller has not waived his
right expressly or impliedly.[Sec.49(1)] f. The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree for the price of the goods
Right of lien
When Lien can be exercised?
Where the goods have been sold without
any stipulation as to credit.
Right of lien
Termination or Loss of Lien a.Deemed appropriation of goods b.The sellers lien is also lost when the buyer or his agent lawfully obtains possession of the goods. c.The seller also loses his right of lien once he waives this right, expressly or impliedly.
(i)If the seller is an unpaid seller. (ii)If he has parted with the possession of goods to carrier. (iii)If the goods are in the transit. (iv)If the buyer of the goods has become insolvent.
Basis Right of lien Right of Stoppage in Transit Possession In order to exercise lien, In order to exercise the right of seller must be in stoppage in transit, the carrier possession of the or the other bailee must be in goods. possession of goods on behalf of the seller. Nature and Right of lien is a right to Right of stoppage in transit is a purpose of retain the goods until right to regain possession. right price due thereon is paid. Availability Seller gets right of lien Seller gets the right of stoppage of the right when the buyer fails to in transit only when the buyer pay. becomes insolvent. End and Lien comes to an end Right of stoppage in transit commence when the seller delivers commences when the seller ment of the goods to a carrier or delivers goods to a carrier or right bailee. bailee. Exercise of The seller himself can The seller through the carrier or right exercise lien. bailee of the goods can exercise this right.
Right of Resale
Where the goods are of a perishable nature, the unpaid seller can resale the goods without any notice to the buyer Where the seller has given a notice to the buyer of his intention to resale the goods, may resale them if the buyer does not within a reasonable time pay the price When a seller expressly reserves a right of resale in case of default in payment, the seller may resale the goods
AUCTION SALE
the sale is complete when the auctioneer announces its completion by the fall of the hammer Auction sale could be conditional or unconditional the property in the goods passes to the buyer by the fall of hammer A right to bid may be reserved expressly by or on behalf of the seller through white bonnet, by bidder, or decoy duck orpuffer
AUCTION SALE
sale by auction may be notified to be subject to a reserve price or upset price Pretended bidding: is voidable at the option of the buyer Knock-out or agreement not to bid each other: Such combinations or knock-out is not illegal Damping is unlawful: Damping is any act by which an intending bidder is dissuaded or discouraged from bidding.