The Sale of Goods Act 1930

Dr.Shradha Padhi
 The Evolution

 Till 1930, transactions relating to sale and purchase of goods

were regulated by the Indian Contract Act, 1872.
 In 1930, Sections 76 to 123 of the Indian Contract Act, 1872
were repealed and a separate Act called ‘The Indian Sale of
Goods Act, 1930 was passed.
 It came into force on 1st July, 1930.
 With effect from 22nd September, 1963, the word ‘Indian’ was
also removed.
 Now, the present Act is called ‘The Sale of Good Act, 1930’.
 This Act extends to the whole of India except the State of
Jammu and Kashmir.
 According to Section 3, the provisions of the Indian Contract
Act, 1872, still continue to apply to contracts for the sale of
goods except where ‘The Sale of Goods Act’, 1930 provides for
the contrary.
 Structure

# Chapter Sections
I Preliminary 1-3
II Formation of the Contract 4-17
III Effects of the Contract 18-30
IV Performance of a Contract 31-44
V Rights of unpaid seller against the Goods 45-54
VI Suits for breach of the Contract 55-61
VII Miscellaneous 62-66
 Chapter I: Preliminary

Section 1: Short title, extent and commencement

Section 2: Definitions
Section 3: Application of provisions of Act 9 of 1872
 Chapter II: Formation of the Contract

Contract of Sale
Section 4: Sale and agreement to sell

Formalities of the contract

Section 5: Contract of sale how made

Subject-matter of contract
Section 6: Existing or future goods
Section 7: Goods perishing before making of contract
Section 8: Goods perishing before sale but after agreement to sell
 Chapter II: Formation of the Contract

The price
Section 9: Ascertainment of price
Section 10: Agreement to sell at valuation

Conditions and warranties

Section 11: Stipulations as to time
Section 12: Condition and warranty
Section 13: When condition to be treated as warranty
Section 14: Implied undertaking as to title, etc.
Section 15: Sale by description
Section 16: Implied conditions as to quality or fitness
Section 17: Sale by sample
 Chapter III: Effects of the Contract

Transfer of property as between seller and buyer

Section 18: Goods must be ascertained
Section 19: Property passes when intended to pass
Section 20: Specific goods in a deliverable state
Section 21: Specific goods to be put into a deliverable state
Section 22: Specific goods in a deliverable state, when the seller has to do
anything thereto in order to ascertain price
Section 23: Sale of unascertained goods and appropriation
Section 24: Goods sent on approval or "on sale or return"
Section 25: Reservation of right of disposal
Section 26: Risk prima facie passes with property
 Chapter III: Effects of the Contract

Transfer of title
Section 27: Sale by person not the owner
Section 28: Sale by one of joint owners
Section 29: Sale by person in possession under voidable contract
Section 30: Seller or buyer in possession after sale
Chapter IV: Performance of a Contract

Section 31: Duties of seller and buyer

Section 32: Payment and delivery are concurrent conditions
Section 33: Delivery
Section 34: Effect of part delivery
Section 35: Buyer to apply for delivery
Section 36: Rules as to delivery
Section 37: Delivery of wrong quantity
Section 38: Instalments deliveries
Section 39: Delivery to carrier or wharfinger
Section 40: Risk where goods are delivered at distance place
Section 41: Buyer's right of examining the goods
Section 42: Acceptance
Section 43: Buyer not bound to return rejected goods
Section 44: Liability of buyer for neglecting or refusing delivery of
goods
Chapter V: Rights of unpaid seller against
the Goods

Section 45: "Unpaid seller" defined

Section 46: Unpaid seller's rights
Section 47: Seller's lien
Section 48: Part delivery
Section 49: Termination of lien

Stoppage in transit
Section 50: Right of stoppage in transit
Section 51: Duration of transit
Section 52: How stoppage in transit is effected

Transfer by buyer and seller

Section 53: Effect of sub sale or pledge by buyer
Section 54: Sale not generally rescinded by lien or stoppage in
transit
Chapter VI: Suits for breach of the Contract

Section 55: Suit for price

Section 56: Damages for non-acceptance
Section 57: Damages for non-delivery
Section 58: Specific performance
Section 59: Remedy for breach of warranty
Section 60: Repudiation of contract before due date
Section 61: Interest by way of damages and special damages
 Chapter VII: Miscellaneous

Section 62: Exchange of implied terms and conditions

Section 63: Reasonable time a question of fact
Section 64: Auction sale
Section 64A:In contracts of sale, amount of increased or
decreased taxes to be added or deducted
Section 65: Repeal
Section 66: Savings
 Contract of Sale

According to Section 4(1) of the Sale of Goods Act, 1930,

“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”. ‘Contract of Sale’ is a generic term which includes
both a sale as well as an agreement to sell.

Such a contract of goods may be absolute or conditional. There

may be contract of Sale between one part owner and the other
 Formation of Contract of Sale

Section 5 of Sale of Goods Act lays down the rules as to how a contract of sale
may be made and has nothing to do with the transfer of property in goods.
According to this section, a contract of sale is made by an offer to buy or sell
by one person, and the acceptance of such offer by another person. And it
may be made in any one of the following modes:

 There may be immediate delivery of goods, but the price may be paid at
some future date
 There may be immediate payment of price, but the delivery may be
made at some future date
 There may be immediate payment of price and the immediate delivery of
goods
 The price and delivery of the goods may be postponed
 he price and delivery of the goods may be agreed to be made in
instalments
 Sale of Goods

When under a contract of Sale the property in the goods is

transferred from the Seller to the Buyer, the Contract is called as a
Sale of Contract.
 Essential Elements of Sale

 There must be a seller as well as a buyer. ‘Buyer’ means a person who buys
or agrees to buy goods [Section 2(1)]. ‘Seller’ means a person who sells or
agrees to sell goods [Section 2(13)].

 ‘Good’ means every kind of movable property other than actionable claims
and money.

 Property means the General property in goods, and not [Section 2(11)].
General property in goods means ownership of the goods.

 There must be a price. Price here means the money consideration for a sale
of goods [Section 2(10)]. When the consideration is only goods, it amount to
a ‘barter’ and not sale.

 In addition to the aforesaid specific essential elements, all the essential

elements of a valid contract as specified under Section 10 of Indian Contract
Act, 1872 must also be present.
 Form

No particular form is necessary to constitute a contract of sale. A

contract of Sale may be in writing or by the word of mouth.

It may be express or may be implied from the conduct of parties

or from the course of dealings between the parties
 Agreement to Sell

Where the transfer of property or transfer of ownership in the

goods is to take place at a future date or subject to some
condition thereafter to be fulfilled, the Contract is called as an
Agreement to Sell.
Agreement to Sell Vs. Agreement of Sale

An agreement to sell does not involve any immediate transfer

of property in the goods.

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.
 Sale Vs. Agreement to Sall

Nature of Contract
 Sale is an Executed Contract While an agreement to Sale is
an executory Contract.
 In executed contract one of the parties has already
performed his part of Contract
 On the other hand in executory Contract both the parties are
yet to perform their mutual promises
Agreement to Sell Vs. Agreement of Sale

Creation of Right
 Sale affects a transfer of General property in the goods to the
Buyer in other words it creates “jus (right) in rem”. (Right in
rem means right against the whole world)
 An Agreement to sell creates “Jus (right) in personam” For eg
personal right only against the person for any default in
fulfilling his part of the Agreement
Agreement to Sell Vs. Agreement of Sale

Passing of the Property

 In case of Sale , the property in goods passes to the Buyer
with the risk while in case of agreement to Sale, the risk and
property does not pass to the Buyer immediately
Agreement to Sell Vs. Agreement of Sale

Remedies in Case of Breach of Contract by the Buyer

 In an agreement to sell, in case of breach of contract by the
Buyer the Seller is entitled to damages since the ownership
has not passed to the Buyer.
 In sale since the ownership has passed to the Buyer the
Seller is entitled to sue for the price of the goods sold even
though the goods may still remain in Seller’s possession and
also has a right of lien , stoppage in transit and resale
Agreement to Sell Vs. Agreement of Sale

Remedies in Case of breach of Contract by the Seller

 If there is an agreement to Sell , and the Seller commits any
breach the buyer has only one remedy a personal remedy
against the Seller namely claim for the damages. The goods
are still the property of the Seller and he can deal with them
as he likes.
 if there is a Sale and the Seller commits a breach the buyer
has not only personal remedy against the seller , but also the
remedies which an owner has in respect of goods such as sue
the Seller etc.
Agreement to Sell Vs. Agreement of Sale

Right to Re-Sell
 In an Agreement to Sell since the ownership has not passed
to the Buyer the Seller is at liberty to Sell the goods to the
Third Parties and the Buyer can claim damages from the
Seller.
 In sale since the ownership has passed to the Buyer the
Seller will be guilty of Conversion if he sells the goods to third
parties and the Buyer can sue and recover those goods as
owner even from the third person
Agreement to Sell Vs. Agreement of Sale

Risk of Loss
 In an Agreement to Sell since the ownership does not pass to
the Buyer , if the goods are destroyed by an accident, the
loss will be the Seller’s even though the goods happen to be
in the Buyer’s possession.
 In a sale since the ownership has passed to the Buyer, even
though the goods are lost by an accident while is the Seller’s
possession the loss will be the Buyer’s.
Agreement to Sell Vs. Agreement of Sale

Effect of Insolvency of the Seller

 In an Agreement to Sell, if the Buyer who has paid for the
goods finds that the Seller has become insolvent the buyer’s
right would be to prove the amount he has paid , in the
Seller’s insolvency.
 In Sale since the ownership has passed to the Buyer if the
Seller becomes insolvent the Buyer is entitled to recover the
goods from the Official Assignee or the Receiver
Agreement to Sell Vs. Agreement of Sale

Effect of Insolvency of the Buyer

 In an Agreement to Sell if the Buyer becomes insolvent
without paying for the goods since the ownership has not
passed to the Buyer the Seller may refuse to deliver the
goods.
 In a Sale since the Ownership has passed to the Buyer if the
Buyer becomes insolvent without having paid for the goods ,
the Seller must deliver the goods to the Official Assignee or
Receiver and can claim a rateable dividend for the price of
the goods
 Example

X agrees to buy 50 tons of oil from Y’s Cisterns. Y has several

cisterns with more than 50 tons of oil in them. This is merely
an agreement to sell the oil.
 Example

X agrees to sell to Y 100 tons of Soda nitrate which is to arrive in

England by a particular ship. This is merely an agreement to sell
at a future date, subject to the condition that the specified ship
arrives in England and the further condition that it carries the
specified cargo on board.
 Example

X agrees to lend an instrument to Y on the terms that if it is

damaged whilst in Y’s possession, Y must pay an agreed sum
as its value and keep the instrument. This is a conditional sale
and if the instrument is so damaged X may recover the agreed
sum as the price of the goods sold.
 Meaning of Goods

As per Section 2(7), Goods means every kind of movable

property other than actionable claims and money, and
includes the following:

1. Stock and shares

2. Growing crops, grass and thing attached to or forming part
of the land which are agreed to be served before sale or
under the Contract of Sale.
 Classification of Goods

Every kind of movable property, other than actionable claims

and money; and includes stocks 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. - Section 2(7)

Goods

Existing Goods Future Goods Contingent Goods

 Existing Goods

Existing goods are goods which are either owned or possessed

by the seller at the time of the contract.

Existing Goods

Specific Goods Ascertained Goods Unascertained Goods

Goods which are Goods which are Goods which are not
identified and agreed ascertained or identified specifically identified but
upon at the time of the at the time of contract are indicated by
contract of sale and are made specific description
later on
 Future Goods

Future goods are goods to be manufactured or produced or

acquired by the seller after the making of the contract of sale.
- [Section 2(6)]

A agrees to sell all the mangoes which will be produced in his

garden next season. This is an agreement for the sale of future
goods.
 Contingent Goods

Where there is a contract for the sale of goods, the acquisition

of which by the seller depends upon a contingency which may
or may not happen - such goods are known as contingent goods.
Contingent goods fall in the class of future goods.

A agrees to sell a certain TV set provided he is able to get it from

its present owner. This is an agreement to sell contingent goods.
In such a case, if the contingency- does not happen for no fault
of the seller, he will not be liable for damages.
 Document of Title of Goods

Document of title is a document used in the ordinary course of business

 As a proof of possession or control of the goods or

 Authorising the holder of the document to receive goods mentioned
therein or to further transfer such right to another person by a proper
endorsement or delivery
 The right of the possessor of document is unconditional

A document of title is also a proof that the goods are in the custody of the
issuing authority which will have the duties of a bailee in relation to the
goods and will deliver the goods to the holder of the document

The common documents of title to goods are:

 Bill of Lading
 Dock Warrant
 Wharfinger’s Certificate
 Railway Receipt:
 Delivery Order
 Price

The price of goods is an important element of a valid sale. It is

the consideration for transfer or agreement to transfer the
property in goods from the seller to the buyer. Thus, there can
be no valid sale without a price.

According to Sec. 2(10) of Sale of Goods Act, “Price means the

money consideration for a sale of goods”.

In other words, the money paid for the purchase of goods is

called the price.
 Modes of Fixing Price

(Sections 9 and 10)

The price may be fixed:

 At the time of contract by the parties themselves, or

 May be left to be determined by the course of dealings between the
parties
 May be left to be fixed in some way stipulated in the contract, or
 May be left to be fixed by some third-party.

Where the contract states that the price is to be fixed by a third-party and he
fails to do so, the contract is void. But if the buyer has already taken the
benefit of the goods, he must pay a reasonable price for them. If the third-
party's failure to fix the price is due to the fault of one of the parties, then
that party is liable for an action for damages.

Where nothing is said by the parties regarding price, the buyer must pay a
reasonable price, and the market price would be a reasonable price.
 Conditions and Warranties

 As a rule, before a contract of sale is concluded, certain

statements are made by the parties to each other.

 If it is a statement by the seller on the reliance of which the

buyer makes the contract, it will amount to a stipulation.

 The stipulation may either be a condition or a warranty.

 Section 12 draws a clear distinction between a condition and

a warranty.

 Whether a stipulation is a condition or only a warranty is a

matter of substance rather than the form of the words used.
 Conditions and Warranties

Condition: It is a stipulation essential to main purpose of the

contract, the breach of which gives right to the repudiate the
contract and to claim damages.

Warranty: It is a stipulation collateral to main purpose of the

contract, the breach of which gives rise to claim for damages but
not the right to reject the goods and treat contract as repudiated.

Conditions and Warranties can either be :

Express: which are expressly provided in the contract
Implied: which the law implies into the contract unless the
parties stipulate to the contrary
 Conditions and Warranties - Difference
Conditions
A condition is essential to the
main purpose of the contract
The aggrieved party can
repudiate the contract or claim
damages or both in case of
breach of condition
A breach of condition may be
treated as breach of warranty.
Warranties
It is only collateral to main
purpose of contract.
The aggrieved party can claim
only the damages in case of
breach of warranty
A breach of warranty cannot be
treated as breach of condition.
 Implied Conditions

 Condition as to title - seller has the right to sell. [Sec.14(a)]

 Sale by description - goods shall correspond with the

description. (Sec.15)

 Condition as to quality or fitness [Sec16(1)]

 Condition as to merchantability [Sec.16(2)]

 Condition implied by custom- fitness for a particular

purpose may be annexed by the usage of trade [Sec.16(3)]

 Sale by sample (Sec.17)

 Implied Warranties

 Warranty of quiet possession [sec.14(b)].

 Warranty of freedom from encumbrances [sec.14(c)].

 Warranty as to quality or fitness by usage of trade [sec16(4)].

 Warranty to disclose dangerous nature of goods.

…..