SALE OF GOODS

ACT 1930
 SALE OF GOODS ACT, 1930

• The law relating to sale and purchase of goods, prior to 1930 were
dealt by the Indian Contract Act, 1872.
• In 1930, Sections 76 to 123 of the Contract Act was repealed and a
separate Act known as the Sale of Goods Act, 1930 was passed
• 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 price".
• This act lays down special provisions governing the contract of
sales of goods.
• The general law of contract is also applicable to the contracts for
the sale of goods unless they are inconsistent with the express
provisions of the Sale of Goods Act.
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CONTRACT OF SALE

• A contract of sale of goods, like any

other contract, results by an offer by
one party and acceptance by the other.

• Section 4(1) of Sale of Goods Act

states the following:
A contract whereby the seller
transfers or agrees to transfer the
property in goods to the buyer for a
price.
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ESSENTIALS
Contract: The word contract OF CONTRACT
means an agreement
Two parties:
parties- a buyer and a seller to
enforceable by law.
Goods: Contract of sale relates
to goods i.e., movable property .
Transaction involving purchase
and sale of immovable property
are out of the purview of the
Sale of Goods Act.
Price: The consideration for the
contract of sale called price
must be money.
OF
SALE
There must be two
constitute a contract of sale.
Transfer of general property:
The object of the contract must
be the transfer of general
property as distinguished from
the special property in the
goods by one person to another.
The term ‘general property’
refers to ownership of goods.
Essential elements of a valid
contract: All the essential
elements of a valid contract
must be present in the contract
of sale.
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 SALE
• Under Section 4(3), Sale and when under a
contract of sale, the property in the goods is
transferred from the seller to the buyer, the
contract is called a ‘sale’.
SALE AND • Example: A goes to a shop and asks for a
toothbrush. Shopkeeper shows him several
AGREEMENT toothbrushes. He picks up one and pays the
TO SELL price for the same. Here the ownership of
toothbrush has been transferred immediately.

Note: Transfer of ownership immediately does not

mean that the physical possession of the property
should also be transferred immediately.

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 AGREEMENT TO SELL
• The section 4(3) of the sale of Goods Act defines it
as, “where the transfer of the property in the goods is
to take place at a future time or subject to some
SALE AND condition thereafter to be fulfilled, the contract is
called an agreement to sell.”
AGREEMENT • Example: A agrees to buys a car from B for Rs.
TO SELL 50,000, and he agrees to pay for the same in two
monthly instalments, the ownership to pass to him
on the payment of second instalment.
Note: 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.

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CASE - A agreed to buy from B a certain quantity of
nitrate of soda. The ship carrying the nitrate of
JOHNSON V soda was yet to arrive. This is `an agreement to
MCDONALD sale`. In this case, the ownership of nitrate of
soda is to be to transferred to A on the arrival of
(1842) 9 M & W the ship containing the specified goods (i.e.
600, 60 RR 838 nitrate of soda)

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 SALE AND AGREEMENT TO SELL -
COMPARISON
BASIS FOR COMPARISON SALE AGREEMENT TO SELL
Nature of Contract Executed Contract Executory Contract

Transfer of property Immediately At some future date

Title In sale, the title of goods transfers to the buyer with the In an agreement to sell, the title of goods remains with the
transfer of goods. seller as there is no transfer of goods.

Right to sell Buyer Seller

Consequences of subsequent loss or Responsibility of buyer Responsibility of seller

damage to the goods

Tax VAT is charged at the time of sale. No tax is levied.

Suit for breach of contract by the seller The buyer can claim damages from the seller and proprietary Here the buyer has the right to claim damages only.
remedy from the party to whom the goods are sold.

Right of unpaid seller Right to sue for the price. Right to sue for damages.

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 As per Section 2 (7) of the Act, “Goods means 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
GOODS: MOVABLE
severed before sale or under the contract of sale.”

It must be movable

Considerations
Things attached to or forming part of land
which can be severed satisfy the movability
criteria.

Tree were sold so that they could be cut out

and separated from the land and then taken
Case – Kursell v. Timber Operators &
away by the buyer. The court held that it
Contractor Ltd. (1927) was sale of goods.

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The subject matter of contract of sale must be goods. The goods can
be classified as follows
• Existing goods
• Existing goods are goods that physically exist and belong to the
seller at the time of contract of sale
• Future goods
• Future goods are goods that are not yet in existence or that do not
yet belong to the seller when the contract of sale is made.
• Contingent goods
• A certain type of future goods but are dependent on a specific
contingency.

KIND OF GOODS
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 EXISTING GOODS
•Existing goods are goods that physically exist and belong to the seller at the time of contract of sale.
•Existing can be further divided into three categories:
 Specific goods
• These are goods that are specifically agreed upon between the seller and buyer at the time of
making the contract of the sale.
• Example – A own multiple Maruti car. B contracts with A to buy his ‘Maruti’ car bearing
number ‘DL 1C 007’
 Ascertained goods
• The ascertained goods are identified after the formation of contract
• Example – A owns 10 ‘Maruti’ cars. B contracts with A to buy one car out of them. After the
contract, A keeps out one car to be given to B.
 Unascertained goods
• These are the goods that are not specifically identified or agreed upon at the time of the contract
of sale but are not specifically identified in the contract.
• Example – A owns 10 ’Maruti’. B contracts with A to buy one car out of them.

Note: When a contract is entered into, it is for unascertained goods. It is subsequent to formation of
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 FUTURE GOODS
Future goods are goods that are not yet in existence or that do not yet
belong to the seller when the contract of sale is made.
• This could be goods that are yet to be manufactured or that the seller
has not yet acquired.
• Example- a farmer may agree to sell a buyer all of the milk produced
by his/her cows in the coming year.
• This is called an "agreement to sell." Because the milk does not yet
exist at the point of making the contract, it is an example of future
goods.
As per Sec 6(3), the contract for sale of future goods is always an
agreement to sell since the ownership of the goods cannot be
transferred before the goods are possessed by the seller.
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 CONTINGENT GOODS

•Contingent goods, under Section 6(2), are the goods, acquisition of which
by the seller depends upon an uncertain contingency.
• It is important to note that a contract of sale of contingent goods is
enforceable only if the event on the happening of which the performance
of the contract is dependent happens, otherwise the contract becomes void.
• Examples
• A agrees to sell to B a specific rare painting provided he is able to
purchase it from its present owner. This is a contract for the sale of
contingent goods.
• X agrees to sell to Y 25 bales of Egyptian cotton, provided the ship
which is bringing them reaches the port safely. It is a contract for the
sale of contingent goods. If the ship in sunk, the contract becomes void
and the seller is not liable.
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PERISHING OF GOODS

• According to Sale of goods act, the perished goods are the

goods that are not available for the use they are mean for.
• The goods are deteriorated to the extent that they cannot be
put to use.
• Following are the possible causes of perishing of the goods
• Physical destruction of the goods
• Damage of goods which destroys the commercial value.
• Loss of goods by theft
• Lawful acquisition of goods by government

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 EFFECTS OF PERISHING
After a contract of sale is made, the subject-matter of the contract may be perished or it may be found
that the subject-matter had already been perished before the making the contract.

• If Goods perished before formation of the contract of sale

 Section 7 of the act states A contract for the sale of specific goods, the contract is void if the goods
without the knowledge of the seller have, at the time when the contract was made, perished or become
so damaged as no longer to answer to their description in the contract.
 This provision is made either on the ground of mutual mistake as to matter of fact essential to
agreement, or on the ground of impossibility of performances, both of which render the contract void
ab-initio.
• Following points are to be taken into consideration
 The goods must be specific goods.
 Where subject-matter as while has been perished, the contract is void.
 The seller must not have the knowledge of destruction of goods.
 The goods must have been perished before formation of the contract.
 Example – S sold a specific cargo to B, which was on its way from Sri Lanka to India. At the time
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contract, the ship had already sunk which the parties were not aware of. The contract of sale is void.
EFFECTS OF PERISHING
• Goods perishing before sale but after agreement to sell
 Where there is an agreement to sell specific goods, and subsequently the goods without
any fault on the part of the seller or buyer perish or become so damaged as no longer to
answer to their description in the agreement before the risk passes to the buyer, the
agreement is thereby avoided.
 It reinforces the rule by Section 26 of the act which says that unless otherwise agreed, the
goods remain at the seller’s risk until property therein is transferred to the buyer.

• Following points are to be taken into consideration

 The contract must be an agreement to sell and not an actual sale.
 The goods should be specific goods. If goods are unascertained, this provision is not
applicable.
 If gods are perished because of the fault of any party, the such party would have to bear
the loss.
 If only part of goods have been perished and the contract is indivisible, the whole contract
is void. If it is divisible, then remaining part of the contract can be enforced.

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EFFECTS OF PERISHING

• Effect if perishing of future goods

Present sale of future goods is an agreement to sale. In case

of future goods, if sufficiently identified, are to be treated as
specific goods, the destruction of which makes the contract
void
Example -A agreed to sell B, 100 tons of potatoes to be
grown
in A’s land. A did everything needed but decease attacked and
could produce only 20 tones. The contract was held as void.

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 DOCUMENTS OF TITLE TO GOODS
• Section 2(4) of the Sale of Goods Act, 1930 states that any document used in ordinary
cause of business, as proof of the possession or control of goods, or authorizing or
purporting to authorize, either by endorsement or by delivery, the possessor of docu­
ment to transfer or receive goods thereby represented is a document of title of goods.
• It is a proof of ownership of goods and authorizes its holder to receive goods or further
transfer such right to another person by proper endorsement of delivery.

• Documents of title to goods are unconditional under taking on the part of issuing
authority to deliver goods. Although these documents can be transferred by mere
delivery or by endorse­ment, yet it is regarded as ‘quasi negotiable instrument’, because
the title of transferee .
• Examples of the Documents of Title to Goods
• Bill of lading
• Dock-warrant
• Warehouse keeper’s certificate,
• Wharfinger’s certificate
• Railway receipt FIRST UP
• Delivery order – etc. CONSULTANTS
 • A contract of sale of goods involves transfer of
ownership from the seller to the buyer.
TRANSFER • Transfer of ownership or property in goods is in
fact the main object of making a contract of
OF sale.
• It is important to know the precise moment of
OWNERSHIP time at which the property in goods passes from
the seller to the buyer for the following
reasons:-

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 IMPORTANCE OF TRANSFER OF OWNERSHIP
• Risk prima facie passes with ownership: In case of destruction of or damage to the goods, it
is the owner who has to bear the loss because the general rule is ‘res perit domino’ risk follows
ownership or whosoever is the owner must bear the loss. The payment of the price or
possession of goods is immaterial.

Case – [Demby Hamilton & Co. Ltd. v. Barden,(1949) All E R. 435]

‘A’ contracts to purchase 30 tons of apple juice from ‘B’.B crushes the apple, puts juice in casks and keeps
them ready for delivery. A , however , delays to take the delivery and the juice goes putrid and has to be
thrown away. A is liable to pay the price.
• Action against third parties: In case the goods have damaged by a third party, it is the only
the owner who can take action against him.
• Insolvency of the seller or the buyer: In the event of insolvency of either the seller or the
buyer, the question whether the Official Receiver or Assignee can take over the goods or not
depends on whether the property in the goods has passed from the seller to the buyer.
• Seller’s right for price: The seller becomes entitled to recover the price of the goods from the
buyer only after the property of goods has been transferred to the buyer.
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RULES REGARDING TRANSFER OF OWNERSHIP
Goods must be ascertained.
For Specific goods(Sec. 20 to 22)
• Property passes when intended to pass.
Section 19 of the Act read as - Where there is a contract of sales of specific or ascertained goods, the property in
them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
Case – Amies v. Jal AIR 1924 Bom.41.
In a sale of instalment, the parties decided that the property in the goods will pass on the payment of the last
instalment. Here ownership will not be transferred at the time of contract but at the payment of last instalment.
• Passing of property at the time of contract(Sec.20)
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.
EXAMPLE: B offers A for his horse a sum of Rs.1000.The horse is to be delivered to B on a fixed day and the
price is to be paid on another fixed day. A accepts the offer. The horse becomes B’s property as soon as the offer
is accepted.
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• Passing of property delayed beyond the date of the contract.
• Goods not in a deliverable state(Sec.21)
• Where there is a contract for sale of specific goods not in a deliverable state, i.e., the seller has to do
something to the goods to put them into the deliverable state, the property does not pass until such
thing is done and the buyer has notice of it.
• When the price of goods is to be ascertained by weighing (Sec. 22)
• Where there is a contract for sale of specific goods in a deliverable state, but the seller is bound to
weigh, measure, test or do some other act or thing with reference to the goods for the purpose of
ascertaining the price, the property does not pass until such act or thing is done and the buyer has
notice thereof.
• When goods are delivered on approval (Sec. 24)
• When goods are delivered to the buyer on approval or “on sale of return” of other similar terms, the
property therein passes to the buyer
• When he signifies his approval or acceptance to the seller or does any other act of adopting the
transaction.
• If he does not signify his approval or acceptance but retains the goods without giving notice or
rejection, or expiration of time of return.
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• For unascertained or future goods

• In the case of a contract for a sale of unascertained or future goods by description ,

property will pass from the seller to the buyer when the goods of the same
description, in a deliverable state, are unconditionally appropriated to the contract by
one party with the consent of the other

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 Insert or Drag & Drop your photo

CONDITIONS &
WARRANTIES (SEC. 11-17)
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 CONDITIONS & WARRANTIES (SEC. 11-17)
• In a contract of sale, parties make certain stipulations, i.e., agree to certain terms
regarding the quality of the goods, the price and the mode of its payment, and the
time and place of delivery of goods.

• All stipulations cannot be treated on the same base.

• Some may be intended by the parties to be of a fundamental nature, e.g. Quality of

the goods to be supplied, the breach of which therefore will be regarded as a breach
of the contract.

• Some may be intended by the parties to be binding, but of a subsidiary or inferior

character, eg., time of payment, so that a breach of these terms will not put an end to
the contract but will make the party committing the breach liable to damages.

• The former stipulations are called ‘conditions’ and the latter ‘warranties’. FIRST UP
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Example: 1
Kaushal asks a dealer to supply him a shirt which would not
shrink after use and wash. The dealer supplies a shirt which
shrinks after use and wash. Kaushal can reject the shirt or keep
the shirt and claim damages. Here the stipulation to supply a
shirt which would not shrink after use and wash is a condition.

Now if Kaushal buys a particular shirt which is warranted by

the dealer to be one which would not shrink after use and wash
and the shirt does shrink after use and wash, Kaushal’s only
remedy is to claim damages

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• Example: 2
A man buys a particular horse which is warranted quiet to ride and drive.
If the horse turns out to be vicious, the buyer’s only remedy is to claim
damages. But if instead of buying a particular horse, a man asks a dealer
to supply him with a quiet horse and the dealer supplies him with a
vicious one, the stipulation is a condition, and the buyer can return the
horse and can also claim damages for breach of contract (Hartley vs
Hyman)

• The illustrations are a clear proof of the fact that an exactly similar term
may be a condition in one contract and a warranty in another depending
upon the construction of the contract as a whole

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 • Stipulations as to time in a contract of
sale fall under the following two
heads:
STIPULATIONS 1. Stipulation relating to time of
AS TO TIME delivery of goods
2. Stipulation relating to time of
payment of the price

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• As regards the time fixed for the delivery of goods, time is usually held to be
the essence of the contract’. Thus if time is fixed for delivery of the goods and
the seller makes a delay, the contract is voidable at the option of the buyer. In
case of late delivery, therefore, the buyer may refuse to accept the delivery and
may put an end to the contract.

• As regards the time fixed for the payment of the price, the general rule is that
‘time is not deemed to be the essence of the contract’, unless a different
intention appears from the terms of the contract (sec. 11). Thus even if the price
is not paid as agreed, the seller cannot avoid the contract on that account. He
has to deliver the goods if the buyer tenders the price within reasonable time
before resale of the goods. The seller may, however, claim compensation for the
loss occasioned to him by the buyer’s failure to pay on the appointed day.

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 • Actual Delivery: If the goods are physically given into the
possession of the buyer, the delivery is an actual delivery.

• Constructive delivery: The transfer of goods can be done even

when the transfer is effected without a change in the
STIPULATIONS possession or custody of the goods. For example, a case of the
delivery by acknowledgment will be a constructive delivery.
AS TO If you pick up a parcel on behalf of your friend and agree to
hold on to it for him, it is a constructive delivery.
DELIVERY
• Symbolic delivery: This kind of delivery involves the delivery
of a thing in token of a transfer of some other thing. For
example, the key of the go-downs with the goods in it, when
handed over to the buyer will constitute a symbolic delivery.

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 • Section 13 deals with cases where a breach of condition is to be
treated as a breach of warranty, as a consequence of which the
buyer loses his right to rescind the contract and has to be content
with a claim for damages only.
WHEN BREACH • These cases are as follows:
OF CONDITION IS • Voluntary waiver by buyer. [section 13(1)]
• Although on a breach of condition by the seller, the buyer has
TO BE TREATED a right to treat the contract as repudiated and reject the goods,
AS BREACH OF but he is not bound to do so
• He may instead elect to waive the condition, i.e., to treat the
WARRANTY breach of condition as a breach of warranty and accept the
goods and sue the seller for damages for breach of warranty.
•2. Where a contract of sale is not severable and the buyer has
accepted the goods or part thereof, the breach of any condition to be
fulfilled by the seller can only be treated as a breach of
warranty ,unless there is a term of the contract, express or implied, to
that effect. [section 13(2)]

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3. Nothing in this section shall affect the case of any condition or warranty
fulfillment of which is excused by law by reason of impossibility or otherwise.
[section 13(3)]

• Illustration:
A agrees to supply B 10 bags of first quality sugar @ Rs. 1625 per bag but
supplies only second quality sugar, the price of which is Rs. 1500 per bag.
There is a breach of condition and the buyer can reject the goods. But if the
buyer so elects, he may treat it as a breach of warranty, accept the second
quality sugar and claim damages @ Rs. 125 per bag.

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Condition as to title (sec. 14)

Sale by description (sec. 15)

Sale by sample (sec. 17)

IMPLIED
CONDITIONS
Condition as to quality or fitness[Sec. 16 (1)]
(SECS. 14-17)
Condition as to merchantability[Sec. 16(2)]

Condition as to wholesomeness

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CONDITION AS
TO TITLE
(SEC(14(A))

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 • 18. Goods must be ascertained.—Where there is a contract for the sale of
unascertained goods, no property in the goods is transferred to the buyer unless
and until the goods are ascertained.
• 19. Property passes when intended to pass.—
•(1) Where there is a contract for the sale of specific or ascertained goods the
property in them is transferred to the buyer at such time as the parties to the
contract intend it to be transferred.
•(2) For the purpose of ascertaining the intention of the parties regard shall be had
WHEN SALE to the terms of the contract, the conduct of the parties and the circumstances of the
case.
COMPLETE (SEC •(3) Unless a different intention appears, the rules contained in sections 20 to 24 are
rules for ascertaining the intention of the parties as to the time at which the property
18-23) – in the goods is to pass to the buyer.

TRANSFER OF • 20. Specific goods in a deliverable state.—Where there is an unconditional

contract for the sale of specific goods in a deliverable state, the property in the
PROPERTY goods passes to the buyer when the contract is made, and it is immaterial
whether the time of payment of the price or the time of delivery of the goods, or
both, is postponed.
• 21. Specific goods to be put into a deliverable state.—Where there is a contract
for the sale of specific goods and the seller is bound to do something to the
goods for the purpose of putting them into a deliverable state, the property does
not pass until such thing is done and the buyer has notice thereof.

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 • 22. Specific goods in a deliverable state, when the seller has to do
anything thereto in order to ascertain price.—Where there is a
contract for the sale of specific goods in a deliverable state, but the
seller is bound to weigh, measure, test or do some other act or thing
with reference to the goods for the purpose of ascertaining the
price, the property does not pass until such act or thing is done and
the buyer has notice thereof.
• 23. Sale of unascertained goods and appropriation.—
WHEN SALE
•(1) Where there is a contract for the sale of unascertained or future
COMPLETE – goods by description and goods of that description and in a
TRANSFER OF deliverable state are unconditionally appropriated to the contract,
either by the seller with the assent of the buyer or by the buyer with
PROPERTY the assent of the seller, the property in the goods thereupon passes to
(CONTD.) the buyer. Such assent may be express or implied, and may be given
either before or after the appropriation is made.
•(2) Delivery to carrier.—Where, in pursuance of the contract, the
seller delivers the goods to the buyer or to a carrier or other bailee
(whether named by the buyer or not) for the purpose of transmission
to the buyer, and does not reserve the right of disposal, he is deemed
to have unconditionally appropriated the goods to the contract.
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CASES

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RISK OF LOSS DAMAGE
(SEC 26)
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RISK OF LOSS DAMAGE (SEC 26)
(1/2)
• Section 26 of the Sale of Goods Act, 1930 states the goods are the owner’s
risk if the property in them has not been transferred to the buyer. But if the
property has been transferred to the buyer then the goods are buyer’s risk.
• The risk is associated with ownership and not with mere possession of the
property.
• The passing of risk means the transfer of the liability for damage or loss of
the property from the seller of the immovable property to the buyer.

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RISK OF LOSS DAMAGE (SEC 26)
(2/2)
• The risk in the property prima facie passes with the property, but if the
parties to the contract agree to pass the risk on the property at some
other level of transaction, then that is also possible, depending upon
the terms of their contract.
• It is also possible that that the title, risk, and possession of the property
pass independent of each other from the seller to the buyer in a sale’s
transaction.

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 EXCEPTIONS (1/2)
• If the delivery has been delayed due to the fault of either party, then the liability of damage will lie
on the party at fault. If the seller has failed to deliver the goods as agreed by the parties and the
goods are damaged or lost due to that, then the seller will bear the cost. If the buyer has failed to
take delivery of goods despite many reminders by the seller, then the buyer will bear the cost.

CASE

DEMBY HAMILTON & CO. LTD. V. BARDEN,

• In Demby Hamilton & Co. Ltd. v. Barden, the sellers agreed to supply 30 tons of apple juice by
samples. The seller crushed 30 tons of apples at once to ensure that they are according to the samples
and filled them in the casks. After some installments had been delivered, the buyer refused to take
further deliveries. The apple juice became putrid.
• It was held that the property in the goods was still with the sellers, but the loss had to be borne by the
buyer.

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 • Irrespective of the fact that the property in the
goods has been transferred or not, the possessor
EXCEPTIONS of the good has same rights and duties as bailee
of the goods. If the damage to the property
(2/2) occurs due to the negligence of the possessor of
the goods, as a bailee, he will be liable to bear
the damage or loss of the goods.

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 • When a seller is not paid for the price of goods, he is
termed as ‘unpaid seller’ under the act.
• “The seller of the unpaid goods is deemed to be an
unpaid seller within the meaning of this act:
• When the whole of the 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
UNPAID SELLER condition on which it was received has not been
fulfilled by reason of the dishonor of the instrument or
(SEC 45) otherwise.”
EXAMPLES:
• S sold certain quantity of jute to B for Rs 1000. B
paid Rs. 500 ad failed to pay the balance. In this
case, S is in position of an ‘unpaid seller’.
• S sold certain goods to B for Rs 5000. B made the
payment by cheque. S presented the cheque to
banker for the payment but it got dishonoured. Now,
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 RIGHTS OF UNPAID SELLER (SEC. 46)

Rights against the goods Rights against the buyers

•When ownership of goods is transferred to the buyer. Right to lien
•When ownership of goods has not been transferred to the buyer. Right to stoppage in transit
Right to resale

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 • A lien is a right of retaining property until a debt due to the person
retaining it has been satisfied.
• This right can be exercised if following conditions are met:
• Where goods have been sold for cash, not on credit, and the price
has not been paid by the buyer.
• Where although the goods were sold on credit, but the buyer has
not made the payment even after the expiry of the period of credit.
• Where the buyer becomes insolvent, even if the credit term has not
been expired. In the case of insolvency it is presumed that the
RIGHT OF LIEN buyer will not be able to pay the price. The seller has a right to
demand full price before making delivery of goods to buyer.
(SEC. 47-49) • The general rule is that delivery of part does not constitute delivery of
the whole.
Miles Vs Gorten (1834)2 C&M 504
• M sold parcel of hops which contained two types of hops i.e. 15
packets of ‘Kent hops’ and 10 packets of ‘Sussex hops’, but rendered
one invoice for the whole. After first kind of packets were delivered,
G, the buyer, became insolvent. The court held that delivery of a
packet of parcel was not intended to be a delivery of the whole and M
could, therefore, exercise his lien as regards remaining packets.
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 It can be exercised by the
seller only if following The seller is unpaid seller
conditions are met:

RIGHT OF
STOPPAGE
OF GOODS
The property in the goods has
The buyer is insolvent already been passed to the
buyer

IN TRANSIT
(SEC 50 -52) The seller has parted with the
possession and the buyer has
not acquired it, i.e., the
possession is with some
independent entity like
railways, or a shipping
company, etc.
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 SECTION 51 (1/2)

• Duration of Transit

• Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other
bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes
delivery of them from such carrier or other bailee.
• If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the
appointed destination, the transit is at an end.
• If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges
to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as
bailee for the buyer or his agent, the transit is at an end and it is immaterial that a further destination
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 SECTION 51 (2/2)

• If the goods are rejected by the buyer and the carrier or other bailee continues in possession of
them, the transit is not deemed to be at an end, even if the seller has refused to receive them back.
• When goods are delivered to a ship chartered by the buyer, it is a question depending on the
circumstances of the particular case, whether they are in the possession of the master as a carrier or
as agent of the buyer.
• Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent
in that behalf, the transit is deemed to be at an end.
• Where part delivery of the goods has been made to the buyer or his agent in that behalf, the
remainder of the goods may be stopped in transit, unless such part delivery has been given in such
circumstances as to show an agreement to give up possession of the whole of the goods.

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 SECTION 52

• Modes of Stoppages
• The unpaid seller may exercise his right of stoppage in transit either by taking actual possession
of the goods, or by giving notice of his claim to the carrier or other bailee in whose possession
the goods are. Such notice may be given either to the person in actual possession of the goods
or to his principal. In the latter case the notice, to be effectual, shall be given at such time and in
such circumstances, that the principal, by the exercise of reasonable diligence, may
communicate it to his servant or agent in time to prevent a delivery to the buyer.
• When notice of stoppage in transit is given by the seller to the carrier or other bailee in
possession of the goods, he shall re-deliver the goods to, or according to the directions of, the
seller. The expenses of such re-delivery shall be borne by the seller

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 • When the seller exercise his right of lien or
stoppage of goods, it does not amount to
rescinding of contract. The property in the
RIGHT OF goods remain with the buyer only. All the sellers
can do is to enforce the payment of price by
RESALE keeping the goods with him. However, if the
buyer does not pay the price even after the lapse
(1/3) of considerable time, the seller will have to
resort to resale the goods.
• In this case the original contract of sale gets
rescinded.

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 • Unpaid seller can exercise his rights to resell goods in
following circumstances:
• Where the goods are of perishable nature
• Where the seller expressly reserves a right of resale in case
RIGHT OF the buyer make a default
• Where the seller gives notice to the buyer about his
RESALE intention to resell the goods in case of non-payment of
price by him within a reasonable time, and after receipt of
(2/3) such notice, the buyer does not pay the price within
reasonable time. In such case, the seller is entitled to:
(a) recover any shortage between contract price and resale
price from the original buyer
(b) retain any surplus of resale price over the contract
price.

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 • However, if the notice of resale is not given to the
buyer, the situation is reverse. If the seller resell the
goods without giving notice to the buyer, he is
RIGHT OF obliged to:
RESALE
• Pay any surplus of resale price over the contrast
(3/3) price to the original buyer, and
• Bear himself any shortage in resale price as
compared to the price of original contract.

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DOCTRINE OF CAVEAT EMPTOR

• ‘Caveat Emptor’ means ‘let the buyer beware’.

• This doctrine says when the buyer purchases a product, he himself is
responsible to see whether he is buying the right thing suited to his purpose or
not.
• Example: S sold certain pigs to B by Auction. The pigs were sold with “all
faults and errors of description”, i.e., no warranty was given by the seller in
respect of any fault of descriptions. B bought the pigs. The pigs were ill, and
all of them, except one died. Moreover they infected the other pigs of the
buyer. The court observed that there was no implied warranty that the pigs
were of good health. It was B’s duty to see whether the pigs were healthy or
not. Thus B could not recover damages from S.
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 •Fitness of Product for the Buyer’s Purpose
• When the buyer informs the seller of his purpose of buying the
goods, it is implied that he is relying on the seller’s judgment.
It is the duty of the seller then to ensure the goods match their
desired usage.

EXCEPTIONS • For example, A goes to B to buy a bicycle. He informs B he

wants to use the cycle for mountain trekking. If B sells him an
TO CAVEAT ordinary bicycle that is incapable of fulfilling A’s purpose the
seller will be responsible. Another example is the case study of
EMPTOR (1/4) Priest v. Last.
•Goods Purchased under Brand Name
• When the buyer buys a product under a trade name or a
branded product the seller cannot be held responsible for the
usefulness or quality of the product. So there is no implied
condition that the goods will be fit for the purpose the buyer
intended.

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 • Goods sold by Description
• When the buyer buys the goods based only on the description there
will be an exception. If the goods do not match the description then
in such a case the seller will be responsible for the goods.

EXCEPTIONS • Goods of Merchantable Quality

• The section 16 (2) deals with the exception of merchantable quality.
TO CAVEAT The sections state that the seller who is selling goods by description
has a duty of providing goods of merchantable quality, i.e. capable
EMPTOR (2/4) of passing the market standards.
• So if the goods are not of marketable quality then the buyer will not
be the one who is responsible. It will be the seller’s responsibility.
However if the buyer has had reasonable chance to examine the
product, then this exception will not apply.

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 •Sale by Sample
• If the buyer buys his goods after examining a sample then the
rule of Doctrine of Caveat Emptor will not apply. If the rest of
the goods do not resemble the sample, the buyer cannot be held
responsible. In this case, the seller will be the one responsible.
EXCEPTIONS For example, A places an order for 50 toy cars with B. He
checks one sample where the car is red. The rest of the cars turn
TO CAVEAT out orange. Here the doctrine will not apply and B will be
responsible.
EMPTOR (3/4) •Sale by Description and Sample
• If the sale is done via sample as well as a description of the
product, the buyer will not be responsible if the goods do not
resemble the sample and/or the description. Then the
responsibility will fall squarely on the seller.

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 •Usage of Trade
• There is an implied condition or warranty about the quality or
the fitness of goods/products. But if a seller deviated from this
then the rules of caveat emptor cease to apply. For example, A
bought goods from B in an auction of the contents of a ship.
EXCEPTIONS But B did not inform A the contents were sea damaged, and so
the rules of the doctrine will not apply here.
TO CAVEAT •Fraud or Misrepresentation by the Seller
• This is another important exception. If the seller obtains the
EMPTOR (4/4) consent of the buyer by fraud then caveat emptor will not
apply. Also if the seller conceals any material defects of the
goods which are later discovered on closer examination then
again the buyer will not be responsible. In both cases, the
seller will be the guilty party.

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DETERMINATION OF PRICE
OF GOODS
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SECTION 2(10) PRICE AS MONEY CONSIDERATION

The price can be termed equivalent to the consideration. In the absence of

such price or consideration, the transfer cannot be termed as a sale. The
transfer by way of the sale must be in exchange for a price.

Price can be fixed in various ways. Different modes to fix the

price are:
• The price is mentioned in the contract itself (Section 9)
• The manner of fixing the price mentioned in contract ( Section 9(1))
• Price is determined by the course of dealing between the parties (Section 9(1))
• When Price is not fixed by any of the above modes (Section 9(2))

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THE PRICE IS MENTIONED IN THE CONTRACT ITSELF (SECTION 9)
• The price in a contract of sale may be fixed by the contract between the
parties.
Example: A agrees to sell his ‘Maruti’ car for Rs.50,000 if a new model of the
car does not come within a week, or for Rs 20,000 if a new model comes
within a week. This agreement is VOID because of uncertainty of the price.

THE MANNER OF FIXING THE PRICE MENTIONED IN CONTRACT

(SECTION 9(1))

• The price maybe fixed in a manner agreed upon in a contract of sale.

Example: A agrees to sell 100 shares of ‘company X’ to B at the rate prevailing
on the 15th day after the deal. This is a VALID contract of sale.
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PRICE IS DETERMINED BY THE COURSE OF DEALING
BETWEEN THE PARTIES (SECTION 9(1))
• Where price is neither expressed in the contract nor any manner of fixing
the price is agreed, the price would be determined by the course of dealings
between the parties.
Example: A contracts with B to buy 100 shares of ‘company X’ to B. In
general course of dealings, the accepted price of shares is the price prevailing
on the date of contract for sale of shares. Thus there is no ambiguity about the
price.. It is the price prevailing in the market on the date of sale.

WHEN PRICE IS NOT FIXED BY ANY OF THE ABOVE

MODES (SECTION 9(2))
• When price is not capable of being fixed by any of above ‘modes’ , a
reasonable price is considered as the price of the contract. What is reasonable
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WHEN PRICE FIXATION IS DONE BY THIRD PARTY
Reasons for which third party has not been able to fix the price:

• Where third party • Where third party • Where third party • Where third party
is “not willing’ to is ‘unable for any has not valued the is prevented from
value the price reason” to value price for any of the valuing the price as
and goods have the price and goods reasons and goods a result of the fault
not been delivered have not been have already been of the seller or
to the buyer, the delivered to the delivered to the buyer, the party in
contract can be buyer, the contract buyer, the buyer fault is liable to pay
avoided. can be avoided. will pay reasonable damages to the
price of the same. party not in fault.

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‘EARNEST MONEY’ AND ‘SECURITY DEPOSIT’

• The ‘Earnest money’ counts as a part of the purchase price payed in

advance. When the transaction goes through it is adjusted against the bill.
• When transaction falls through by reason of default or failure of the buyer,
the other party can rescind the contract and return the earnest money. Thus
the earnest money is liable to be forfeited.

Example: A contracted to supply potatoes, eggs ,fish etc. To Military

Headquarters. He deposited Rs. 18,500 as a security for due performance of
the contract. A committed defaults in making regular and full supplies. The
government rescinded the contract and forfeited the deposit. The court held
that the amount was a ‘security deposit’ and the government was not entitled
to forfeit the same.
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Consequences of NOT adhering to the time in a sales contract

WHEN TIME IS STIPULATED REGARDING PAYMENT OF THE PRICE

• Section 11 of the Act provides that, ‘unless a different

intention appears from the terms of the contract, stipulations
as to time of payment are not deemed to be the essence of the
contract of sale’.
• If the payments are not made in time the seller cannot avoid
the contract but can claim damage.
Example: A sells 100 tables to B with a stipulation that the
payment should be made within 3 days. B makes the payment
after 5 days of contract. Here A cannot avoid the contract on the
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Consequences of NOT adhering to the time in a sales contract

WHEN TIME IS STIPULATED REGARDING DELIVERY OF

GOODS

• If nothing is mentioned in the contract, time stipulated for

delivery is considered to be of the essence of the contract.
• Non performance at the stipulated time would render the
contract voidable at the option of the buyer.

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 ANTITRUST LAWS

• Purpose: Maintain the competitive market.

• This is done by condemning anticompetitive behaviour
by companies that already have market power and by
stopping companies from engaging in exclusionary
activity to gain monopoly power.
• Antitrust laws ban the company actions that may hamper
a new company’s equal opportunity to enter the market
and forbid any company action that would force an
efficient company to leave the market.

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 THE SHERMAN ACT

• Every contract, combination in the form of trust or otherwise,

conspiracy, in restraint of trade or commerce among the
several states, or with foreign nations, is declared to be illegal.
• Every person who shall monopolize, attempt to do that, or
combine or conspire with any other person to monopolize any
part of the trade or commerce among the states or with foreign
nations, shall be deemed guilty of a felony.

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POTENTIAL Per se violations: Which means no
Défense or justification is allowed.

VIOLATIONS
OF
Rule of reason: Defending who engage
SHERMAN in potentially anticompetitive
behaviour have the opportunity to
ACT explain to a court the legitimate reason
for their business decisions

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CASE: UNITED STATES V. SOCONY
VACUUM OIL CO..INC.,310 U.S. (1940)

The Socony-Vacuum Oil Company was convicted of engaging

in an unlawful business agreement that restrained trade in
the gasoline market. The Supreme Court stated that the
defendant committed a violation of Sherman Act 1, and it
will continue to follow the traditional view that price-fixing
agreements are unlawful “per se” under the Act. The court
made it clear that it was a “per se violation” when it stated in
the opinion that it refused to consider any evidence that the
agreements had procompetitive aspects.
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CARTELIZATION

• A cartel is an explicit agreement among competing companies to

fix prices, or engage in some other activity that is intended to
reduce competition, in a particular market.
• Cartels are more likely to affect price when:

There are high The market is not The products are There is a non
barriers for new government homogeneous. numerous amount of
businesses to enter regulated. companies in the
the market. market.

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 RESALE PRICE MAINTENANCE AND VERTICAL NON
PRICE RESTRAINTS

• Resale price maintenance takes place when a wholesaler makes

its sale contingent on the retailer’s selling the product at a certain
price.

CASE: Leegin Creative Leather Products, Inc v. PSKS, Inc.,551 U.S. 877
(2007)
The leader brought suit alleging that the manufacturer violated the Sherman
Act by suspending all shipments to the retailer after it violated the
manufacturer’s policy, which required retailers to follow the manufacturers
suggested retail prices. The supreme court reasoned that the lower courts had
not consistently applied the ”per se” test because of the potential procompetitive
aspects of resale price maintenance; therefore it had the obligation to overrule
use of the “per se” test.

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 QUANTITY DISCOUNTS

• Quantity discounts for consumer purchases are Legal, but these

given by a business to other business customers are not always
legal.
• Giving a large buyer a quantity discount is condemned unless the
large purchase and lower price can be justified by the seller’s
diminished costs due to manufacturing, delivery, or sale, or by
the seller’s good faith effort to meet a competitor’s equally low
price.

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 PRIMARY-LINE VIOLATION AND PREDATORY
PRICING

• Primary violations are often referred to as predatory conduct and

are analysed similarly with predatory- pricing exclusionary
activity of Sherman Act, section-2, violations.
• The law is concerned with a company pricing its products or
service at an amount that causes its competitors to leave the
market and thereby that company gains the power to charge
supercompetitive prices in the relevant market.

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INSURANCE
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INSURANCE FRAUD
• Insurance fraud is any act committed to defraud an insurance
process. This occurs when a claimant attempts to obtain some benefit
or advantage they are not entitled to, or when an insurer knowingly
denies some benefit that is due.

• The most common schemes include: premium diversion, fee churning,

asset diversion, and workers compensation fraud. Perpetrators in these
schemes can be insurance company employees or claimants

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FALSE INSURANCE CLAIMS

• False insurance claims are Insurance claims filed with the intent
to defraud an insurance provider.
• Fraudulent claims account for a significant portion of all claims
received by insurers, and cost billions of dollars annually. Types of
insurance fraud are diverse, and occur in all areas of insurance.
Insurance crimes also range in severity, from slightly exaggerating
claims to deliberately causing accidents or damage.
• Fraudulent activities affect the lives of innocent people, both directly
through accidental or intentional injury or damage, and indirectly as
these crimes lead to higher insurance premiums. Insurance fraud
poses a significant problem, and governments and other
organizations try to deter such activity.

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 CASE

CBI VS. RAJESH KOHLI & ORS.

• False insurance claim has been obtained by the accused persons

from NIC DO­X when consignor, consignee and transporters were
non­existent at their respective given addresses, during the relevant
period. Further, the circumstances indicate that either no goods
were transported or the transportation of the goods, as alleged, was
fake and manipulated.

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CONTD…
• Accused Vijay Dayal claimed himself to be the proprietor of M/s
Vinayak Polymers. He got the sale invoice in the name of M/s
Vinayak Polymers, 1716, Gali Piauwali, Dariba Chandni Chowk,
Delhi 6. He forged and used the same as genuine in this case for
obtaining false insurance claims as he projected himself as
Proprietor of said M/s Vinayak Polymers. M/s Vinayak Polymers
opened account in the bank on 3.9.1997 in Vaish Co­operative Adarsh
Bank, Paschim Vihar, New Delhi, where accused Vijay Dayal posed
as Proprietor and authorised signatory of M/s Vinayak Polymers but
he gave a different business address as 26A, Jawala Heri Paschim
Vihar and his own address as C­2/159, West Enclave, Pitampura,
Delhi­34.

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CONT.

• It is well settled that the witnesses may tell lie but the circumstances
and the documents, placed and proved on record will not. The
documents and circumstances proved and appearing on record, in
this case clearly show the involvement of all the accused persons
actively, in committing all alleged overt acts to achieve their goals of
getting false and frivolous insurance claims, passed in this case by
cheating the NIC Ltd.

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THEFT OF GOODS
• This policy provides cover for property
contained in business premises, stocks
owned by you or held in trust and/or
commission. It can be further extended
to cover cash, valuables, securities kept
in a locked safe or cash box in locked
steel cupboard.
• The policy can be extended to cover
riot, strike, malicious damage and theft.

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 • Loss or damage to insured property due to burglary
and/or housebreaking
• Damage to premises caused by burglars during
burglary or attempts at burglary The policy pays
actual loss / damage to the insured property caused
THEFT OF by burglary / house breaking subject to the limit of
sum insured.
GOODS: • If the sum insured is not adequate, the policy pays
INCLUSIONS only proportionate loss. There is also a provision in
the policy to cover bulk items on "first loss" basis,
wherein a percentage of total stock stored can be
taken as that exposed to the risk of burglary and
housebreaking. The premium is charged on this
percentage selected only. A nominal premium is
charged on the balance stock.
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 • For goods held in trust / commission,
Cash,jewellery, curios, title deeds, business
books (unless specifically insured)
• Due to shop lifting, acts involving you or your
THEFT OF family members / employees
GOODS: • Due to war perils, natural calamities and nuclear
perils
EXCLUSIONS • For items stolen from a safe using a key or
duplicate key, unless it is obtained by violence
or threat

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NO INSURANCE
CLAIM FOR
THEFT
COMMITTED
WITHOUT
VIOLENCE: SC
The SC has ruled that a The court observed "The
person or an entity can’t terms of the policy have
seek compensation on to be construed as it is
insured goods if theft and we cannot add or
happened without subtract something
violence

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SLIDE TITLE

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