The Sale of Goods Act, 1930

• Earlier The sale of goods was contained in chapter VII of the Indian Contract Act,
1872.
• But now it is a separate Act, it is called “The Sale of Goods Act, 1930”.

Application of this Act (Section 1)

• Whole of India
• Assent of president on 15th March, 1930.
• Come into force on 1st July 1930.
• Total Section 66 and Chapters VII
Objective of the Act
• The Sale of Goods Act 1930 was introduced with the objective
of balancing the rights, duties, claims and expectations arising in the
process of transferring of property from one person to another i.e. of
buyers and sellers.
• to set up the contracts where the seller agrees to sell the goods or
transfer the ownership of the goods to the other person called the
buyer against a reasonable amount of consideration.
• A contract of sale can be express or it can be implied.
Definitions (Section 2)
S. 2(1) “buyer” means a person who buys or agrees to buy goods;
S.2(2) “delivery” means voluntary transfer of possession from one
person to another;
S.2(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;
S.2(13) “seller” means a person who sells or agrees to sell goods;
Contract of Sale 1/2
According to section 4 of the Act, “ A contract of sale means where the
seller transfers or agrees to transfer the property in goods to the buyer
for price.”
Contract of sale may be two types-
A) Sale
It is a contract where the ownership in the goods is transferred by seller
to the buyer immediately at the conclusion of contract.
Example- A sells his house to B for rupees 100000. it is a sale since the
ownership of the house has been transferred from A to B.
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B) Agreement of Sell
It is a contract of sale where the transfer of property in goods is to take
place at a future date or subject to some condition thereafter to be
fulfilled.
Case Law- Johnson vs McDonald (1842)
In this case Johnson agreed to buy from McDonald a certain quantity
of nitrate of soda. The ship carrying the nitrate of soda was yet to
arrive. The ownership of nitrate of soda is to be transferred to Johnson
on the arrival of the ship. This is an agreement of sale.
Difference between Sale and Agreement of
sale
Sale
1. It is a contract where the ownership in the goods is
transferred by seller to the buyer immediately at
the conclusion of contract.
2. A sale is an executed contract.
3. In sale risk transfer with the ownership from seller
to buyer.
4. The buyer has the right to use the goods he buys.
He becomes the sole owner of goods and can use
them in any manner.
5. It is a present sale
6. seller cant resale the goods
Agreement to Sale
1. It is a contract of sale where the transfer of
property in goods is to take place at a future date or
subject to some condition thereafter to be fulfilled.
2. An agreement to sale is an executory contract as
the property has to pass in future.
3. In case of agreement to sell the seller is to bear the
risk of loss even though the goods are in possession
of the buyer.
4. It is only a agreement between the buyer and the
seller and does not give the buyer the right to use the
goods till the ownership of good is transferred to the
buyer.
5. It is a future sale.
6. Seller can sell goods to third party.
Essential Elements of Contract of sale 1/3
There are following essential elements of contract of sale which are given below-
1) A valid Contract
A contract of sale is just like any other contract made under Indian Contract Act,
1872. Therefore to constitute a valid contract of sale. It should satisfy all the
essentials of a valid contract.
( A valid offer, acceptance, free consent, lawful consideration, competent to
parties and lawful object.
2) Two Parties
Contract of sale has two parties who make the contract. The parties in a contract
of sale are the buyer and seller.
2/3
Buyer
The person who buys the goods or makes an agreement to buy is called the buyer.
Seller
The person who sells goods or makes an agreement to sell is called the seller.

The two parties in contract of sale and the buyer and the seller are two different
persons. A person obviously cannot buy something from himself.
But in Auction, partnership not apply this rule.
3) Goods
The subject matter of the contract of sale is essentially the goods. Goods should be only
movable property. Services are not included.
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4) Price
Goods are always sold for a price. There must be a consideration for the
sale of goods and the consideration must be in terms of money.
5) Transfer of Ownership
In a contract of sale it is essential that the ownership of goods is
transferred from the seller to the buyer. The transfer of ownership can
be at the time of making the contract or it can be at a future date.
GOODS Definition (Section 2(7)) of The
Sales of Goods Act, 1930

Meaning of goods [Section 2(7)]

Goods mean every kind of movable property other than actionable
claims and money, and include the following:
• Stock and share
• 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.
Types of Goods 1/2
I- Existing Goods
Existing goods mean the goods which are either owned or possessed by the seller at the time of
contract of sale. The existing goods may be specific or ascertained or unascertained as follows:
a) Specific and Ascertained Goods
Specified goods are the goods which are identified and agreed upon at the time when a contract of
sale is made.
For example- specified TV, VCR, Car, Ring.
b) Unspecified/Unsanctioned Goods
These are the goods which are not identified and agreed upon at the time when a contract of sale is
made.
Example- in a contract for the sale of 100 tonnes of Rice , the seller may deliver any 1000 tonnes that
answer the contract description.
2/2
II- Future Goods
Future goods mean goods to be manufactured or produced or acquired by the seller after
the making of the contract of sale. There can be an agreement to sell only. There can be
no sale in respect of future goods because one cannot sell what he does not possess.
Example- A makes a contract with B to sell some electronic equipment which he will
receive from Japan after 2 weeks. The contract in such case will be for future goods.
III- Contingent Goods
These are the goods the acquisition of which by the seller depends upon a
contingency which may or may not happen.
Example- Farmer making a contract to supply 100 KG of paddy if proper rain falls
in the season.
Nemo Dat Quod Non Habet (Section 27)
1/2
General Rule
“The general rule is that only the owner of goods can sell the goods and transfer
his title to the goods to the buyer. (no one gives what he doesn’t have).
The Nemo Dat Quad non Habet rule is based on the Latin doctrine, which means
that No one can give or transfer what he himself does not possess.
It means that “the buyer obtains no better title to the goods than the seller.” thus
if the seller has a good title to the goods the buyer would also have a good title.
Example- Satish steals some goods and sells the same to Gopal. Since Satish is not
the owner of goods, Gopal too would not be an owner, even if he has bought the
goods in good faith.
2/2
Section 27, as a general rule, tries to protect the interest of the true owner
when it provides that where the goods are sold by a person who is not the
owner thereof and who does not sell them under the authority or with the
consent of the owner, the buyer acquires no better title to the goods than
the seller has.
 If the title of the seller is defective, the buyer’s title will also be subject
to the same defect. The rule does not imply that buyer’s title will always
be a bad one.
What it means is that the buyer cannot acquire a superior title to that of
the seller. If a thief disposes of stolen goods, the buyer of such goods has
the same title as the seller had.
Conditions and Warranty (Section 11-17)
Meaning of Stipulation (Section 12(1))
“A stipulation in a contract of sale of goods may be a condition or
warranty.”
All the stipulations in a contract of sale are not of equal importance.
Some of them are essential the main purpose of the contract which are
called conditions and some are collateral to the main purpose of the
contract which are called warranties.
Types of stipulation
I – Conditions
“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.

II – Warranty
“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 not to treat the contract as repudiated”.
Essentials of a Condition
Conditions
“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”.

There are following essentials of a condition-

1) It is essential to the main purpose of the contract.
2) The non fulfillment of condition causes irreparable damage to the aggrieved
party which would defeat the very purpose for which the contract is made.
3) The breach of a condition gives a right to the aggrieved party to rescind the
contract and recover the damages for breach of condition.
Example
Ravi goes to a horse- trader and says that he wants to buy a
horse that can run at 40 km an hour. The trader gives him a
horse and says that the horse will run as per Ravi requirement.
Here the horse being fast enough to run 40 km/hour is the
essential condition of the contract. If the horse is not that fast
a runner as Ravi had stipulated and does only 20 km in an
hour can not only file a suit for damages against the trader but
also repudiate the contract.
 Essentials of a Warranty
Warranty
“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 not to treat the contract as repudiated’.

There are following essentials of warranty-

1) It is collateral to the main purpose of the contract.
2) The breach of warranty causes damage to the aggrieved party and does not
defeat the main purpose of the contract.
3) The aggrieved party can only claim the damages for breach of warranty but can
not repudiate the contract.
Example
Hari goes to a horse –trader and says that he wants to buy a
good horse. The trader offer him a horse and says that it can
run at 40 km an hour. Hari buys the horse. Later he comes to
know that the horse can only run 30 km in an hour. Here the
commitment of the trader is only a warranty and is not an
essential condition of the contract. Non- fulfillment of a
warranty only entitles the buyer to receive damages from the
seller not to repudiate the contract.
Test of Determination whether stipulation
is a Condition or Warranty

Whether stipulation in a contract of sale is condition or a warranty

depends upon the structure of the contract and the intention of
parties.
Rights and Duties of the Buyer
a) Rights 
i. To receive delivery of the goods.
ii. To repudiate the contract if the seller commits breach of contract.
iii. To have reasonable opportunity to examine the goods.
iv. To sue the seller for damages for non-delivery of the goods.
v. To recover the amount paid if the seller fails to deliver the goods.
vi. To sue the seller for specific performance of the contract.
vii. To sue seller for damages for breach of warranty.
viii. In case of breach of contract by the seller, when the buyer sues for the refund of
the price, the buyer has a right to claim interest on the amount of price paid from
the date on which the payment was made.
Rights and Duties of the Buyer
b) Duties
i. To pay for the goods and take delivery thereof.
ii. To apply for the delivery of goods as the seller is not bound to
deliver the goods until the buyer applies for delivery.
iii. To compensate the seller for any loss occasioned by his neglect or
refusal to take delivery of the goods and also for reasonable charge
for care and custody of the goods.
Rights and Duties of the Seller
a) Rights
i. To receive the price of the goods.
ii. To receive compensation or sue for damages for any loss occasioned by him by neglect or
refusal of the buyer to take delivery of the goods.
iii. To receive reasonable charge for care and custody of the goods.
iv. If he is unpaid seller then to exercise his right of lien, to exercise his right of stoppage in
transit; and to exercise his right of resale.
v. To sue the buyer for damages for wrongfully neglecting or refusing to accept the goods.
vi. To recover interest from the buyer if there is specific agreement to that effect or charge
interest on the price when it becomes due.
vii. To sue for the price of the goods.
viii. To sue for damages on buyer repudiating the contract.
Rights and Duties of the Seller
b) Duties
i. To deliver the goods when buyer demands the delivery thereof.
ii. To compensate the buyer in case he repudiates the contract or
commits breach of the contract.
iii. To give reasonable opportunity to the buyer to examine the goods.
iv. To refund the amount paid by the buyer in case he fails to deliver
the goods.
v. To compensate the buyer in case of delivery of wrong quantity.
UNPAID SELLER (Section 45)
“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.”
“When the whole of the price has not been paid or tendered. When a
bill of exchange or other negotiable instrument (such as cheque) has
been received as conditional payment, and it has been dishonored.
(Section 45).
Example- A purchased goods worth Rupees 20000 from B. The
ownership has already been transferred to A. But has not paid whole
price or paid rupees 15000 to B. Here B is an unpaid seller.
RIGHTS OF AN UNPAID SELLER 1/3
The unpaid seller has the following rights-
I – Rights against the Goods
When the buyer has not paid the full or partial price of the goods supplied to him, then the
seller who has transferred the ownership of goods to the buyer has the following rights with
regard to the goods.
A) Right of lien
Lien is the right to retain possession of goods until payment in respect of them is paid.
B) Right of stoppage of goods in transit
If he receives information that the buyer has become insolvent the seller has the right to stop
the goods in transit.
C) Right of re-sale
An unpaid seller has the right to re-sell the goods. If in case the buyer makes default.
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II– Rights against the buyer of Goods
An unpaid seller has the following rights against the buyer-
A) Suit for Price
If the ownership of goods has been transferred to the buyer and he refuse
to make the payment for the goods the seller has the right to file a suit
against the buyer.
B) Suit for Damages
If the buyer refuses to accept the goods or defaults in making the payment
for them with a malafide intention the seller has the right to file a suit
against the buyer for damages.
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C) Repudiation of contract before due date
If the buyer repudiates the contract before the due date for the delivery of
goods and the seller does not accept the repudiation and waits for the due
date to make the delivery he reserves the right to sue the buyer for
repudiating the contract.
D) Suit for interest
the unpaid seller has the right to be paid interest by the buyer for any delay in
making the payment. Such interest is affective from the date when the price is
payable.
• If the goods are sold on credit, interest will run from the expiry of the credit.
DOCTRINE OF CAVEAT EMPTOR
The doctrine of caveat emptor means “let the buyer beware”.
It is applicable in a contract of sale. The object of this doctrine is that
when a contract of sale is made between the buyer and the seller it is
the duty of the buyer to examine the goods to his satisfaction before he
buys them. The seller of goods is not obliged to point out the defects in
the goods he is selling.
When a buyer has bought the goods of his own will and after examining
it properly then the seller is not liable afterwards.
EXCEPTIONS TO THE RULE OF
CAVEAT EMPTOR 1/2
The doctrine of the buyer beware does not apply in the following situations-
1) Where the buyer relies on the skill and judgment of the seller
Where the buyer makes known his requirements to the seller of what he expects from
the goods or how he intends to use them and relies on the skill and judgment of the
seller and the deal is made by the seller or manufacture with the buyer on such
understanding the doctrine of caveat emptor is not applicable.
2) Fitness for a particular purpose
The implied condition about the fitness of goods for a particular purpose in terms of
quality and usability in some circumstances depends on the customs or practices of a
trade and the doctrine of buyer beware is not applicable.
Example- when a person buys a water cooler, the implied condition is that it cools the
water.
2/2
3) Sale by description
When the sale of goods is made by description it involves some implied
conditions and warranties and the caveat emptor doctrine is not applicable.
4) Sale by fraud
Where the buyer relies on false representation of the seller and suffers
damages. A seller who is guilty of fraud shall have no protection of the
doctrine of caveat emptor.
5) Latent defects
The buyer cant spot the latent defects in goods that are not apparent when
he examines the goods. The liability for such defects is therefore the sellers.