BUSINESS LAW

UNIT-2
(2019-20 Batch)

PRESENTED BY

K.BALASRI PRASAD
B.Sc(KU), M.B.A(OU), NET(UGC), (Ph.D)(MGU)
 UNIT-2
Contract of Sale: Essentials of Valid Sale - Sale
and Agreement to Sell – Definition and Types
of Goods - Conditions and Warranties - Caveat
Emptor - Exceptions - - Unpaid Seller - Rights
of Unpaid Seller. Consumer Protection Act
1986: Definitions of Consumer – Person –
Goods - Service - Consumer Dispute -
Consumer Protection Councils - Consumer
Dispute Redressal Agencies - Appeals.
The Sale of Goods Act, 1930
“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. There may
be a contract of sale between
one part owner and another”.
Features of Contact of Sale of Goods:
1. The Parties: The parties are called
the seller and the buyer. They should
be two different individuals.
2. Subject Matter(Movable goods): A
contract of goods should be made
only in respect of movable goods.
The goods may be either Existing
goods, Future goods or Contingent
goods.
3. Transfer of Property: The seller
should transfer the ownership of
the goods to the buyer, so that the
buyer becomes owner of goods
after sale.
4. Consideration: The buyer should
pay value of the goods to the
seller in the form of money. It is
called price.
5. Absolute or Conditional: When the
seller transfers the ownership in goods to
the buyer immediately, it is called
Absolute contract. I he agrees to transfer
the ownership at a later date or in future,
it is called Conditional contract.
6. Features of Valid Contract: All other
features of a valid contract should exist in
a contract of sale of goods also so as to
be enforced in a court of law, such as
Proposal, Acceptance, Free consent etc.
Transfer of Property and Delivery of Goods
After the contract of sale of
goods is made, the seller will
have to transfer the ownership
of the goods to buyer and
deliver the goods physically
and the buyer will have to pay
the price.
 Sale Agreement to Sale
Ownership passes to the buyer Ownership remains with the seller.

It is a executed contract. It is an executary Contract

Risk of loss falls on the buyer. Risk of loss falls on the seller

Seller cannot resell the goods. Seller can sell goods to third party.

It can be in case of existing It can be in case of future and

and specific goods. unascertained goods.
Definition of Goods:
• One of the most crucial terms to define is the goods
that are to be included in the Contract of Sale. The
Act defines the term “Goods” in its sec 2(7) as all
types of movable property. The sec 2(7) of the Act
goes as follows:
• “Every kind of movable 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 detached before sale or under the
contract of sale will be considered goods”
Types of Goods:
1. Existing Goods
The goods that are referred to in the contract of sale
are termed as existing goods if they are present at the
time of the contract. In sec 6 of the Act, the existing
goods are those goods which are in the
legal possession or are owned by the seller at the time
of the formulation of the contract of sale. The existing
goods are further of the following types:
a) Specific Goods:
According to the sec 2(14) of the Act, these are those goods
that are “identified and agreed upon” when the contract of sale is
formed. For example, you want to sell your mobile phone online.
You put an advertisement with its picture and information. A buyer agrees to the
sale and a contract is formed. The mobile, in this case, is specific good.
b) Ascertained Goods:
This is a type not defined by the law but by
the judicial interpretation. This term is used for
specific goods which have been selected from a
larger set of goods.
For example, you have 500 apples. Out of these 500
apples, you decide to sell 200 apples. To sell these 200
apples, you will need to separate them from the 500 (larger
set). Thus you specify 200 apples from a larger group of
unspecified apples. These 200 apples are now the
ascertained goods.
c) Unascertained Goods:
These are the goods that have not been
specifically identified but have rather been left to be
selected from a larger group.
For example, from your 500 apples, you decide to sell
200 apples but you don’t specify which ones you want to
sell. A seller will have the liberty to choose any 200 apples
from the lot. These are thus the unascertained goods.
2. Future Goods:
In sec 2(6) of the Act, future goods have been
defined as the goods that will either be
manufactured or produced or acquired by the seller
at the time the contract of sale is made. The
contract for the sale of future goods will never have
the actual sale in it, it will always be an agreement
to sell.
For example, you have an apple orchard with apples
in it. You agree to sell 1000 apples to a buyer after the
apples ripe. This is a sale that has to occur in the future but
the goods have been identified already and the agreement
made. Such goods are known as future goods.
3. Contingent Goods
Contingent goods are actually a subtype of
future goods in the sense that in contingent goods
the actual sale is to be done in the future. These
goods are part of a sale contract that has some
contingency clause in it.
For example, if you sell your apples from your
orchard when the trees are yet to produce apples, the
apples are a contingent good. This sale is dependent on the
condition that the trees are able to produce apples, which
may not happen.
Conditions and Warranties:
When a contract of sale of goods
is made between a seller and
buyer, they agree upon certain
terms and conditions relating to
the subject matter of the contract.
They are known as “Stipulations”
as per Law.
The most important stipulations are called
“ Conditions”.
The less important stipulations are called
“Warranties”.
The seller should satisfy all the conditions
without fail otherwise the buyer can reject
the contract.
But, if the seller fails to satisfy the Warranties,
the buyer cannot reject the contract. The
seller should be allowed to perform the
contract paying reasonable damages for the
breach of Warranty.
Types of Conditions and Warranties:
The Conditions and Warranties
relating to a contract of sale of goods
are classified into two types:
1. Expressed Conditions and Warranties
2. Implied Conditions and Warranties
1. Expressed Conditions and Warranties:
The stipulations agreed between the
parties either in words spoken or in words
written are known as Expressed
Conditions and Warranties.
2. Implied Conditions and Warranties:
The Conditions and Warranties prescribed
by the Sale of Goods Act-1930 are known
as Implied Conditions and Warranties.
Implied Conditions as per Law:
1. Implied Condition as to Title or
Ownership(Sec-14): A person should
not sell goods under a contract of sale
of goods unless he is the owner of the
goods.
2. Implied Condition as to Description
(Sec-15): The goods sold under any
description should satisfy the
description so made by the seller.
3. Implied Condition as to Description and
Sample: If goods are sold by description
and sample such goods should satisfy
both the conditions.
4. Implied Condition as to Quality and
Fitness: There is no implied condition as
to quality and fitness of goods to the
purpose of the buyer. Therefore the
buyer should be careful regarding quality
and suitability to his purpose. This is
known as the rule of “Buyer Beware”.
Implied Warranties as per Law:
1. Implied Warranty regarding quite
Possession: The buyer should be allowed
to possess the goods quietly without any
disturbance from seller.
2. Implied Warranty regarding Freeness
from encumbrance(Burden): The goods
sold should not have been already
mortgaged or pledged or hypothecated
to others.
3. Implied Warranty regarding sale of
dangerous goods: Goods likely to cause
danger to the buyer should not be sold
under a contract of sale of goods.
4. Implied Warranty annexed by trade
custom or usage: In case garments, if
they are not suitable to the person for
whom they are purchased, such goods
are to be exchanged.
Unpaid Seller:
In simple words, "Unpaid seller" means a person who has
sold the goods for a price but price has not been paid to
him.
A seller of goods is an unpaid seller within the meaning of
the Sale of Goods Act 1979, when the whole price has not
been paid or tendered or 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.
Rights of Unpaid Seller:
Rights of Unpaid Seller Against Buyer
 When the buyer of goods does not pay his dues to the seller, the
seller becomes an unpaid seller.
 And now the seller has certain rights against the buyer. Such rights
are the seller remedies against the breach of contract by the buyer.

1) Suit for Price

Under the contract of sale, if the property of the goods is
already passed but he refuses to pay for the goods the seller
becomes an unpaid seller. In such a case. the seller can sue the
buyer for wrongfully refusing to pay him his due.
But say, contract says that the price will be paid at a later
date irrespective of the delivery of goods,. And on such a day, if the
buyer refuses to pay, the unpaid seller may sue for the price of the
goods.
2) Suit for Damages for Non-Acceptance
If the buyer wrongfully refuses or neglects to
accept and pay the unpaid seller, the seller can sue the
buyer for damages caused due to his non-acceptance of
goods. Since the buyer refused to buy the goods without
any just cause, the seller may face certain damages.
The measure of such damages is decided by the
Section 73 of the Indian Contract Act 1872, which deals
with damages and penalties.
Take for example the case of seller A. He agrees to
sell to B, 100 liters of milk for a decided price. On the
day, B refuses to accept the goods for no justifiable
reason. A is not able to find another buyer and the milk
goes bad. In such a case, A can sue B for damages.
 3) Repudiation of Contract before Due Date
If the buyer rejects the contract before the
delivery date of the goods the seller can still sue for
damages.
4) Suit for Interest
If there is a specific agreement between the
parties the seller can sue for the interest amount due
to him from the buyer. This is when both parties have
specifically agreed on the interest rate to be paid to
seller from the date on which the payment becomes
due.
But if the parties do not have such specific
terms, still the court may award the seller with the
The Consumer Protection Act, 1986:
Consumer Protection Act was passed in the
year 1986. Came into force from 15th April,
1987.
 The main object of this law is to protect the
consumers of goods and services from the
unfair practices by the traders.
 It has also constituted Consumer Redressal
Forums and Commissions at district level,
state level and national level for the settlement
of consumer disputes.
Definition of Consumer:
“ Any person who hires or avails
any services for consideration
which has been paid or promised
or partly paid and partly promised
or under any system of deferred
payments and includes any
beneficiary of such services other
than the hirer.”
Definition of Consumer Covers:-
1. One who buys or agrees to buy goods for a consideration
for personal use
2. One who uses such goods with permission of buyer of
goods.
3. One who obtains goods on hire purchase or lease
4. One who hires or avails of any services for a consideration.
5. One who uses the services with permission of person who
has hired the services.
6. One who obtains services on deferred payment basis i.e.,
hire purchase or lease.
7. One who buys goods or hires services exclusively for
purpose of earning livelihood.
Definition of Goods:
“ Goods means every kind of movable
property other than actionable claims
and money, and includes stocks and
shares, growing crops and things
attached to or forming part of land
which are agreed to be served for the
purpose of sale.”
Definition of Services:
“ Services means service of any
description which is made available to
the potential users. It includes the
provision of facilities in connection
with banking, financing, insurance,
transportation, processing, supply of
electrical or other energy etc.”
Definition of Consumer Dispute:
Section2(1)(e)
A dispute occurs when the person against
whom a complaint has been made, denies
or disputes the allegations contained in
the complaint.
If the person against whom complaint is
made agrees to the complaint, there is no
consumer dispute.
Consumer Protection Councils:
A. Central Consumer Protection Council:
Establishment: The Central Government shall by notification
establish a Central Protection Council consisting of the
following members:
(i) The minister in-charge of Consumer affairs in the Central
Government as the chairman.
(ii) The minister of state or Deputy minister as Vice Chairman.
(iii)The ministers in-charge of Consumer affairs in states.
(iv)Eight members of parliament – Five from the Lok sabha
and three from the Rajya sabha.
(v) The secretary of the National Commission for SC’s and
ST’s.
(vi) Representatives of the Central Government Departments
and autonomous organizations concerned with consumer
interests, not exceedingly twenty.
(vii) Representatives of the Consumer Organizations or
Consumers – not less than thirty five
(viii) Representatives of Women – not less than ten.
(ix) Representative of farmers, trade and industries – not
exceeding twenty.
(x) Persons capable of representing consumer interest not
specified above- not exceeding fifteen.
(xi) The secretary in-charge of the Consumer affairs in the
Central Government shall be the Member Secretary of the
Central Council.
The term of the Council shall be 3 years.
Procedure for meetings of the Central Council:
(1) The Central Council shall meet as and when
necessary, but at least one meeting of the Council
shall be held every year.
(2) The Central Council shall meet at such time and
place as the Chairman may think fir and shall
observe such procedure in regard to the transaction
of its business may be prescribed.
B. State Consumer Protection Council:
(1)The State Government may, by notification,
establish with effect from such date as it may
specify in such notification, a council to be known
as the Consumer Protection Council or State
Council
(2)The State Council shall consist of the following
members:
(a) the minister in-charge of consumer affairs in the
State Government who shall be its Chairman;
(b) such number of other official and non-official
members representing such interest as may be
prescribed by State Government
(3) The State Council shall meet as and when
necessary but not less than two meetings shall be
held every year
(4) The State Council shall meet at such time and
place as the Chairman may think fit and shall
observe such procedure in regard to the
transaction.
Objectives of the State Council: The objectives of
every State Council shall be to promote and
protect within the State , the rights of the
Consumers laid down in Clauses (a) to (f) of
Section 6.
C. District Consumer Protection Council:
(1)The State Government shall establish for every
district, by notification, a council to be known as
the District Consumer Protection Council.
(2)The District Consumer Protection Council ( District
Council) shall consist of the following members;
(a) the Collector of the District, who shall be its
Chairman
(b) such number of other official and non-official
members representing such interests as may be
prescribed by the State Government.
(3) The District Council shall meet as and when
necessary but not less than two meetings shall
be held every year.
(4) The District Council shall meet as such time
and place within the district as the Chairman
may think fit as may be prescribed by the State
Government.
Objectives of the State Council: The objectives of
every State Council shall be to promote and protect
within the State , the rights of the Consumers laid
down in Clauses (a) to (f) of Section 6.