SALE OF GOODS ACT, 1930

Act is subject to general legal principles of contract

Special features of contract of sale

Passing of good title
Conditions and warranties
Rights of seller if he does not receive the price
Rights of a buyer if he does not receive the
goods
What is a Contract of sale of goods ?
it is a contract
whereby
seller transfers
or
agrees to transfer
property in goods
to the buyer
for a price
 Two concepts

Sale Agreement to sell

The property in
The property in goods is goods is to be
transferred to the buyer transferred at a
future date or
Is subject to some
conditions to be
fulfilled after the
agreement
Essential elements in a contract of sale

Two distinct parties

Goods, movable
(immovable goods are not covered)
Price
(not goods for goods, it is a barter)
Transfer of property
Essential elements of a contract
 When is a transaction not a sale ?
Supply of liquor to a watchman as wages

A co op. soc. recd. Cotton from its members,

pressed it into bales and thereafter sold the bales.

The transaction was not one of purchase by society.

It acted only as an intermediary.
 Sale & Agreement to sell
Sale Agreement to sell

Transfer of Passes At a future time

property immediately
Executed contract Executory
contract
Type of goods Existing and Future and
specific contingent
Risk of loss Falls on buyer Rests on seller
(even though the goods
may be in possession of
buyer)
 Sale Agreement to sell

Consequences of Seller can sue Seller can sue only

breach the buyer in for damages and
case he fails to not for price
pay
Right to re sell Seller cannot Seller can resell,
resell second buyer gets
a good title, if
purchased without
prior notice
General & Jus in rem, right Jus in personam,
particular against all the right only against
property world the seller to sue
 Sale Agreement to sell

Insolvency of The seller must Seller is not bound

buyer deliver the to part with the
goods to the goods, if not paid
receiver for.
Insolvency of The buyer can Can claim only a
seller recover the rateable dividend
goods from the and not the goods,
official receiver as the property has
not yet passed on.
 Sale and Hire Purchase
Sale HP

Ownership Transferred as Transferred only

and when when a certain
contract is agreed number of
entered into installments paid
Buyer owner bailee
 Sale HP

Termination of Buyer cannot Hire purchaser

contract terminate has an option to
terminate
Payment by It is considered Hire charges, and
installments towards purchase not payment of
price price
 Goods
Subject matter of any contract of sale

Goods means
Every kind of movable property
Other than
(i) Actionable claims and (ii) money.
 It includes
Stocks and shares
Growing crops, grass
Things attached to or forming part of
land which are agreed to be severed
before sale or under contract of sale
 What is not goods ?
(i) Immovable property
(ii) Actionable claim
It is a claim to any debt or any
beneficial interest in movable
property not in possession
A debt due from one person to
another is an actionable claim, cannot
be bought or sold as goods
(iii) Money
 Classification of Goods
(Section 6)

Existing
Goods Owned or Specific goods
possessed Ascertained
by seller at goods
the time of Unascertained
sale goods
 Seller do not possess at the time of
Future sale
Goods Will be manufactured or produced or
acquired at a future point of time

Contingent Type of future goods

Acquisition depends on contingency
Goods
of an event that may or may not
happen
 Future Goods
Fly ash that may accumulate at the pump house
of a power plant.

Wool that will grow on sheeps that the seller

possesses at the time of agreement
 Destruction of Goods
Effects

Goods perishing before Goods perishing after agreement to

the making of contract sell but before the sale

Contract becomes void, if Agreement to sell specific

perishes without the goods becomes void
knowledge of seller, or
becomes so damaged so as
to answer their description
CONDITIONS & WARRANTIES
A stipulation in a contract of sale
with reference to goods which are the
subject thereof may be a condition or
warranty

A stipulation in a contract is a
condition or warranty or neither,
would naturally depend on the
construction of the contract in each
case
 Condition

A stipulation which is essential to the

main purpose of the contract

It goes to the root of the contract

It goes directly to the substance of the

contract
 Warranty

A stipulation that is collateral to the

main purpose of the contract

It is not so vital that a failure to

perform it goes to the substance of
the contract
 Basic Difference

Is there any Is there any

breach of breach of
condition ? warranty ?

Aggrieved Aggrieved party

party can avoid can recover
the contract damages
‘A’ Govt.

To supply timber
of certain quality
Suptd. Of a
Gun
Inspection and Factory
recommendation

Goods tested
and rejected
Whether a stipulation in a contract is
a condition or warranty is to be
gathered from the evidence, sense
and meaning of the parties

But when the buyer accepts the

breach of the condition, it will be
treated as a warranty
 Implied conditions
Condition as to title
Sale by description
Condition as to quality or fitness
Condition as to merchantability
Sale by sample
Condition as to wholesomeness
 Condition as to Title
M/s XYZ USA
Importer Supplier

3000 tins of
condensed milk

Goods confiscated on
Labelled tins so as to
import by customs deptt
infringe Nestle’s
trade mark
Ordered to remove Nestle’s
stickers and sell. Sold at loss.
There was an implied condition
that USA supplier had a title to
sell Nestle’s goods
 Sale by Description

“If you contract to sell peas, you cannot

oblige a party to take beans.”
 Quality or Fitness

An order was placed for some lorries to be

used for heavy traffic in a hilly area. The
lorries supplied were unfit and broke down.
 Merchantability
What is Merchantability ?
Saleable under the description by which they
are known to the market.

A firm in Liverpool contracted with a firm in

London for supply of Manilla Hemp that were
to be imported from Singapore by London
Firm. During transit, the goods were damaged
due to sea water. The could no longer pass as
Manilla Hemp in the market.
 Sale by Sample
Three implied conditions -
• That the bulk shall correspond with the
sample in quality
• That the buyer shall have a reasonable
opportunity to compare sample with
bulk
• Goods shall be free from any defect
rendering them non merchantable.
 Transfer of Property
Three stages in a contract of sale

Transfer of property in goods

Transfer of possession of goods
Passing of the risk

Property : exclusive right to possess, enjoy and dispose of a

thing
Two parameters for Transfer of Property

Goods must be Intention of the

ascertained parties
Sec 18 Sec 19

Look at the terms of

the contract, conduct of
parties and
circumstances of case
 B was entitled to cut teak trees of
more than 12 inches girth. The
stumps of the trees after cutting
had to be 3 inches high. Before the
trees were felled, the forest vested
in the State of MP through an act.

Held : The property in the trees had not passed

to the buyer yet. They would pass when the
timber was felled and ascertained.
 In a mixed contract for storage of paddy
and the sale of same thereafter, the paddy
was delivered by ‘A’ to ‘B’ for storage.
‘B’ had the option to name a particular
day on which he was to buy the paddy.

Held : The property in paddy did not pass to ‘B’

until B named the particular day.
 Where there is an unconditional
contract for the sale of specific goods
in a deliverable state, the property in
the goods passes to the buyer when
the contract is made

Passing of property
in goods at the time
of contract The fact that the time of payment of
price or time of delivery of goods or
both is postponed, does not prevent
the property in goods passing at once
 The normal theory of sale is cash
against delivery but in great majority
of cases, especially in commercial
transactions, this theory is departed
from practice.
 B selects a book in a book shop. The
price is settled. He arranges to take
delivery of the books the next day and
agrees to pay for the books on the first
of the next month.

The property in the books has passed to the

buyer and he is bound to pay the price.
 Goods not in deliverable state

The seller has to do something to the

goods to put them into a deliverable
state

The property does not pass until such

thing is done and the buyer has notice
of it
 Contract of sale for unascertained or
future goods
Two pre-conditions for the transfer of property
Ascertainment of goods
Unconditional appropriation of goods to to the
contract

Appropriation involves selection of goods with the intention of

using them in performance of the contract and with the mutual
consent of the seller and the buyer.
Goods sent on approval or
‘on sale or return’
Property in goods passes to the buyer –

(i) When he signifies his approval or

acceptance to the seller or
(ii) When he does any other act adopting the
transaction
‘K’ delivered some jewellery to ‘W’
on ‘sale or return’.
‘W’ pledged it with ‘A’.
Act of pledging by ‘W’ amounts to
adopting the transaction

Goods are delivered by ‘A’ to ‘B’ on

sale or return. Further delivered by
‘B’ to ‘C’ and by ‘C’ to ‘D’. The
goods are stolen while custody of
‘D’.
Reservation of right of disposal

The property in goods,

whether specific or subsequently
appropriated to the contract
does not pass to the buyer
if the seller
reserves
the right of disposal of the goods
until certain conditions are fulfilled.
 UNPAID SELLER
When the whole of the price has not
been paid or tendered

The bill of exchange or other

negotiable instrument is dishonoured

When the seller takes a bill of exchange or other negotiable

instrument of the price, the instrument operates as a
conditional payment. On the dishonour of the instrument,
the seller’s rights revive.
 Rights of an unpaid seller

Against the goods

Lien Stoppage in transit Resale

 Rights against the buyer personally

Suit for price

Suit for damages

Repudiation of contract

Suit for interest

 What is a lien ?

Lien is a right to retain the property

until a debt due to the person
retaining it has been satisfied.
 When can one exercise this right ?

Where the goods have been sold without any

stipulation as to credit

Where the goods have been sold on credit

but the term of credit has expired

Where the buyer becomes insolvent

 Stoppage in Transit

When the buyer of the goods

becomes insolvent, the unpaid seller
who has parted with the possession of
the goods has the right of stopping
them in transit
 Right of resale
Where goods are of perishable nature
Or
Where the seller who has exercised his right of
stoppage in transit gives notice to the buyer of
his intention to resell

Where the seller expressly reserves a right of re

sale in case the buyer should make a default