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Business Law
SALES OF GOODS ACT PART 2
PREPARED FOR: PREPARED BY:

SIR MANSOOR ALI SHAHANI FATIMA MARVI 15566

HAMNA ASGHAR 18837

SHAHERYAR ALI 15769

YUSRA FATIMA18928
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Letter of Acknowledgement:

Korangi Creek, Karachi-75190, Pakistan

UAN (9221)111-002-004, Fax: (9221) 509-0968http://www.iobm.edu.pk

Dear Reader, Dated: 15 th APRIL 2015

It is an honor for us to prepare this report on “Sales of Goods Act Part 2” assigned to us
by our respected instructorSir Mansoor Ali Shahani. We want to thank him for providing
us the direction all along to be able to materialize our content for the report.It is a
research based report, concluding the findings from different articles. It was a pleasure
creating such a report, on a topic so enlightening, which also plays a vital role in our
professional lives in the near future.

Sincerely yours,

Fatima Marvi

Hamna Asghar

Shaheryar Ali

Yusra Fatima
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Table of Content:
Topic: Sales of Goods Act II
1. Introduction..............................................................................................page3

2.Formation of the contract……………………………………………………………….page 4

3. Contract of sale………………………………………………………………………………page 5

3.1 Sale and agreement to sell

3.2 Capacity to buy and sell
3.3 Contract of sale how made
4. Subject Matter Of Contract…………………………………………………………….page 8

4.1 Existing or future goods

4.2 Goods which have perished

5.ThePrice…………………………………………………………………………………………..page 10

6. Condition and warranties………………………………………………………………page 12

5.1 Stipulation as to time

5.2 When conditions to be treated as warranty
5.3 Implied understanding as to title, & C.
5.4 Sale by description
5.4 Implied condition as to quality or fitness
7. Sale by sample …………………………………………………………………………...page 18

6.1 Sale by sample

6.2 No waiver of warranties or condition
8. Conclusion……………………………………………………………………………………page 21
9. References…………………………………………………………………………………..page 22
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SALES OF GOODS ACT PART II

Introduction:
The sales of goods is the most common commercial contracts. A knowledge
of its main principle is of utmost importance to all classes of the community.
The law relating to it is contained in the sale of goods act, 1930. Contract for
the sale of goods are subject to the general legal principle applicable to all
contracts, such as offer and its acceptance, the capacity of parties, free and
real consent, consideration, and legality of h object. Sales of Goods Act part II
is called “Formation of Contract” which has 5 divisions. It is a contract by
which ownership of movable goods is transferred from the seller to the buyer.
Sales of goods extents to the whole of Pakistan. It can be defined as:

“Sales of goods is an act which deals with the rights and obligations of the
buyer and seller of the goods that is movable property.”
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FORMATION OF THE CONTRACT

Division 1: Contract of sale

 Sale and agreement to sell

 Capacity to buy and sell
 Contract of sale how made

Division 2: Subject matter of contract

 Existing or future goods

 Goods which have perished
 Goods perishing before sales but after agreement to sell

Division 3: The price

 Ascertainment of price
 Agreement to sell at valuation

Division 4: Condition and warranties

 Stipulation as to time
 When conditions to be treated as warranty
 Implied understanding as to title, & C.
 Sale by description
 Implied condition as to quality or fitness

Division 5: Sale by sample

 sale by sample
 no waiver of warranties or condition
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DIVISION 1
CONTRACT OF SALE
Essentials of a Contract of Sale:

 It is a contract.
 Between two parties.
 To transfer or agree to transfer.
 The property in goods.
 For a price, that is, money consideration.

Goods

GOODS form the subject of a contract of sale. They mean every kind of
movable property other than actionable claims & money, and include 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.

 Sale and agreement to sell (6)

Sale: the property of the good passes from the seller to the buyer
immediately. So the seller is no more owner of the goods sold. It is an
executed contract.

Agreement to sell: the transfer of property of the goods is to take place at

future time or subject to certain conditions to be full filled. It is an executory
contract.
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(1) A contract of sale of goods is a contract by which the seller transfers or

agrees to transfer the property in goods to the buyer for a money
consideration, called the price.

(2) There may be a contract of sale between one part owner and another.

(3) A contract of sale may be absolute or conditional.

(4) If under a contract of sale the property in the goods is transferred from
the seller to the buyer, the contract is called a sale.

(5) If the transfer of the property in the goods is to take place at a future time
or is subject to some condition to be fulfilled later, the contract is called an
agreement to sell.

(6) 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.

 Capacity to buy and sell (7)

(1) In this section, "necessaries" means goods suitable to the condition in life
of a person, and to the person's actual requirements at the time of the sale
and delivery.

(2) Capacity to buy and sell is regulated by the general law concerning capacity
to contract and to transfer and acquire property.

(3) Despite subsection (2), if necessaries are sold and delivered to a person
who because of mental incapacity or drunkenness is incompetent to contract,
that person must pay a reasonable price for them.

 Contract of sale (8)

(1) Subject to this or any other Act, a contract of sale may be made in
writing, either with or without seal, or by word of mouth, or partly in writing
and partly by word of mouth, or may be implied from the conduct of the
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parties.. Subject to the provisions of any law for the time being in force a
contract of sale may be made in writing or by word of mouth, or partly in
writing and party by word of mouth or may be implied from the conduct of
the parties. Subject-matter of Contract.
(2) Nothing in this section affects the law relating to corporations. A
contract of sale is made by an offer to buy or sell goods for a price and the
acceptance of such offer. The contract may provide for the immediate
delivery of the goods or immediate payment ofthe price or both, or for the
delivery or payment by installments, or that the delivery or payment or both
shall be postponed.

 ESSENTIALS OF A CONTRACT OF SALE:

1. Two parties: There must be two parties a buyer and a seller to

constitute a contract of sale.
2. Goods: contract of sales relates to goods .i.e. movable property.
Transaction involving purchase and sale of immovable property are
out of the sales of goods act.
3. 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”.
4. Price: the consideration for the contract of sale called price must be
money.
5. Essential elements of a valid contract: all essential element of a valid
contract must be present in the contract of sales.
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Division 2
Subject matter of contract
Basic Concepts:
 “Future goods” means goods to be manufactured or produced or
acquired by the seller after the making of the contract of sale;

 “Goods” means every kind of movable property other than actionable

claims and money; and includes 4[electricity, water, gas,] 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;

 Existing or future goods(9)

(1) The goods that form the subject of a contract of sale may be
either existing goods, owned or possessed by the seller, or
future goods.

(2) There may be a contract for the sale of goods, the acquisition
of which by the seller depends on a contingency that may or may
not happen.
(3) If by a contract of sale the seller purports to effect a present
sale of future goods, the contract operates as an agreement to
sell the goods.
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 Goods that have perished(10)

A contract for the sale of specific goods is void if, without the knowledge of
the seller, the goods have perished at the time when the contract is made.

 Goods perishing before sale but after agreement to

sell(11)
If there is an agreement to sell specific goods, and subsequently the goods,
without any fault on the part of the seller or buyer, perish before the risk
passes to the buyer, the agreement is avoided.
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Division 3
The price
 Ascertainment of price(12):
(1) The price in a contract of sale may be
(a) Set by the contract,
(b) Left to be set as agreed in the contract, or
(c) Determined by the course of dealing between the
parties.
(2) If the price is not determined in accordance with subsection (1), the
buyer must pay a reasonable price.

(3) What is a reasonable price is a question of fact dependent on the

circumstances of each case.

 Agreement to sell at valuation(13)

(1) If there is an agreement to sell goods on the terms that the price
is to be set by the valuation of a third party, and the third party
cannot or does not do so, the agreement is avoided.
(2) If the goods or any part of them have been delivered to and
appropriated by the buyer, subsection (1) does not apply and
the buyer must pay a reasonable price for the goods.
(3) If the third party is prevented from making the valuation by
the fault of the seller or buyer, the party not in fault may
maintain an action for damages against the party in fault.
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Division 4

Conditions and Warranties

Conditions And Warranties:

It is usual for both seller and buyer to make representations to each other at
the time of entering into a contract of sale. Some of these representations
are mere opinions which do not form a part of contract of sale. Whereas
some of them may become a part of contract sale. Representations which
become a part of contract of sale are termed as stipulations which may rank
as condition and warranty for e.g. a mere commendation of his goods by the
seller doesn’t become a stipulation and gives no right of action of the buyer
against the seller as such representations are mere opinion on the part of
the seller. But where the seller assumes to assert a fact of which the buyer is
ignorant, it will amount to a stipulation forming an essential part of the
contract of sale.

Meaning of stipulation:
A stipulation in a contract of sale of goods may be a condition or warranty.

Meaning of Condition:

A condition is a stipulation:
(a) Which is essential to the main purpose of the contract, and
(b) The breach of which gives the aggrieved part a right to terminate the
contract.
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Meaning of warranty:

A warranty is a stipulation:
(a) Which is the collateral to the main purpose of the contract, and
(b) The breach of which gives the aggrieved party a right to claim
damages but not right to reject goods and to terminate the contract.

 Stipulations as to time(13):
(1) Unless a different intention appears from the terms of the
contract, stipulations as to time of payment are not deemed to
be of the essence of a contract of sale.
(2) Whether any other stipulation as to time is of the essence of
the contract or not depends on the terms of the contract.
(3) In a contract of sale, unless there is evidence to the contrary,
"month" means calendar month.

 When Conditions To Be Treated As Warranty(14):

In the following three cases a breach of contract is treated as breach of
warranty

(a) When the buyer waives the condition: once the buyer waives the
condition he cannot insist one its fulfillment e.g. accepting defective
goods or beyond the stipulated time accounts to waiving condition.
(b) Where the buyer elects to treat the breach of the contract as a breach
of warranty; e.g. where he claims damages instead of repudiating the
contract.
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(c) Where the contract is not severable and the buyer has accepted the
goods or part thereof, the breach of any condition by the seller can
only be treated as a breach of warranty. It cannot be treated as a
ground for rejecting the goods unless otherwise specified in the
contract. Thus where the buyer after purchasing the goods find that
some condition is not fulfilled, he cannot reject the goods. He has to
retain the goods entitling him to claim damages.

Implied and Expressed Conditions and Warranties:

In a contract of goods of sales conditions or warranties may be:

i. Expressed or

ii. Implied

(i). Expressed Conditions and Warranties:

These are expressly provided in the contract e.g. a buyer wants buy a SONY
TV Model No. 2062. Here Model No is an expressed condition. In the
advertisement for ROYAL FANS, a guarantee for 2 years is an express
warranty.

(ii). Implied Conditions and Warranty:

These are implied by law in every contract of sales of goods unless a
contrary intention appears from the terms of contract.

The various implied conditions and warranties are showed below:

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Implied Conditions And Warranties

Conditions Warranties
1. Conditions as to title. [section14(a)] 1. Warranty as to quiet possession.
2. Conditions in the case of sale by [section 14(b)]
sample. [section 15] 2. Warranty of freedom from
3. Condition in the case of sale by encumbrances. [section 14(c)]
sample. [section 17] 3. Warranty as to quality or fitness for a
4. Condition in the case of both particular purpose annexed by usage
sample and description. [section15] of trade. [section 16(3)]
5. Condition as to quality and fitness.
[section16(1)]
6. Conditions as to merchantable
quality. [section16(2)]
7. Conditions as to wholesomeness.
8. Conditions implied by customs.
[section16(3)]

 Condition As to Title Under [Section(14a)] (15):

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In a contract of sale or lease, unless the circumstances of the contract are

such as to show a different intention, there is
(a) An implied condition on the part of the seller or lessor that
(i) In the case of a sale or lease, the seller or lessor has a right to sell or lease
the goods, and
(ii) In the case of an agreement to sell or lease, the seller or lessor will have
a right to sell or lease the goods at the time when the property is to pass or
the lessee is to take possession of the leased goods,
(b) An implied warranty that the buyer or lessee is to have and enjoy quiet
possession of the goods, and
(c) An implied warranty that the goods are free from any charge or
encumbrance in favor of any third party, not declared or known to the buyer
or lessee before or at the time when the contract is made.

 Sales By Description(16)
(1) In a contract for the sale or lease of goods by description, there is an
implied condition that the goods must correspond with the description.

(2) If the sale or lease is by sample, as well as by description, it is not

sufficient that the bulk of the goods correspond with the sample if the
goods do not also correspond with the description.

 Implied Conditions As To Quality Or Fitness(17)

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Subject to this and any other Act, there is no implied warranty or

condition as to the quality or fitness for any particular purpose goods
supplied under a contract of sale or lease, except as follows:
(a) If the buyer or lessee, expressly or by implication, makes known to
the seller or lessor the particular purpose for which the goods are
required, so as to show that thebuyer or lessee relies on the seller's or
lessor's skill or judgment, and the goods are of a description that it is
in the course of the seller's or lessor's business to supply, whether the
seller or lessor is the manufacturer or not, there is an implied
condition that the goods are reasonably fit for that purpose; except
that in the case of a contract for the sale or lease of a specified article
under its patent or other trade name, there is no implied condition as
to its fitness for any particular purpose;
(b) If goods are bought by description from a seller or lessor who
deals in goods of that description, whether the seller or lessor is the
manufacturer or not, there is an implied condition that the goods are
of merchantable quality; but if the buyer or lessee has examined the
goods there is no implied condition as regards defects that the
examination ought to have revealed;
(c) There is an implied condition that the goods will be durable for a
reasonable period of time having regard to the use to which they
would normally be put and to all the surrounding circumstances of the
sale or lease;
(d) An implied warranty or condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade;
(e) An express warranty or condition does not negative a warranty or
condition implied by this Act unless inconsistent with it.
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DIVISION 5
Sale by sample

Sale by sample
Sale by sample is a sale in which the buyer purchases goods under an agreed
condition that goods sold are as good as one shown to the buyer as a sample.
Sample is a part of transaction constituting express guarantee that whole
goods conform to the sample. Sale by sample is a contract based on
understanding between the parties. Goods not exhibited must conform to the
standard exhibited by the sample. The sample is a fair representation of the
quality of the bulk, and the seller is bound by the warranty. This is also known
as sample sale.
“Any sample or model which is made part of the basis of the bargain creates
an express warranty that the whole of the goods shall conform to the
sample “

The components of Sale by sample include:

(1) A contract of sale or lease is a contract for sale or lease by
sample if there is a term in the contract, express or implied, to
that effect.
(2) In a contract for sale or lease by sample,
(a) There is an implied condition that the bulk must
correspond with the sample in quality,
(b) There is an implied condition that the buyer or
lessee must have a reasonable opportunity of
comparing the bulk with the sample, and
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(c) There is an implied condition that the goods must

be free from any defect rendering them un-
merchantable that would not be apparent on
reasonable examination of the sample.

No waiver of warranties or conditions

Warranty is aseller's assurance to a purchaser that the goods or services being

purchased are or shall be as represented and, if not, will be replaced or
repaired.
Warranties for your goods and services can be either express or implied.
Express warranties are those made in writing or directly given by you to your
customer or client. Examples of express warranties are "Parts and labor
warranted for 90 days on moving parts."

Implied warranties aren't expressly stated but can be derived from

advertisements and literature. Examples are "You'll never have to paint again
if you use this product" or "Use this rust-free compound to save time and
money." The implication is that no rust will form on the item and that you'll
never have to redo your project.

The contract act specifies the following criteria:-

(1) For the purpose of this section, retail sale or lease includes every
contract of sale or lease made by a seller or lessor in the
ordinary course of the seller's or lessor's business but does not
include a sale or lease of goods
(a) To a purchaser for resale or to a lessee for
subletting,
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(b) To a purchaser or lessee who intends to use the

goods primarily for business purposes,
(c) To a corporation or an industrial or commercial
enterprise, or
(d) By a trustee in bankruptcy, a liquidator or sheriff.
(2) Despite section 18 (e) or 69, in the case of a retail sale or
lease of goods, other than goods that on reasonable inspection
appear to be used goods or goods that are described or
represented by the seller or lessor to be used, any term of a
contract of sale or lease, or any collateral or contemporaneous
contract or agreement, that purports to negative or in any way
diminish the conditions or warranties under sections 17, 18 and
19 of this Act, is,
(a) If a term, severable from the contract and void, or
(b) If a collateral or contemporaneous contract or
agreement, void.
(3) Despite section 18 (e) or 69, in the case of a retail sale or
lease of new or used goods,
(a) Any term of a contract of sale or lease, or
(b) Any collateral or contemporaneous contract or
agreement,
That purports to negative or in any way diminish the condition
or warranty under section 16 is,
(c) If a term, severable from the contract and void, or
(d) If a collateral or contemporaneous contract or
agreement, void.
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Conclusion:
A contract for sale of goods has, however, certain peculiar features
such as, transfer of ownership of the goods, delivery of goods rights
and duties of the buyer and seller, remedies for breach of contract,
conditions and warranties implied under a contract for sale of goods,
etc. These peculiarities are the subject matter of the provisions of the
Sale of Goods Act, 1930.
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References:

http://www.austlii.edu.au/au/legis/nt/consol_act/soga128/

http://www.bclaws.ca/civix/document/id/complete/statreg/96410_01

http://www.ma-law.org.pk/pdflaw/Sale%20of%20Goods%20Act,%201930.pdf

http://www.vakilno1.com/saarclaw/pakistan/sale-of-goods-act-1930-
pakistan.html

http://www.bclaws.ca/civix/document/id/complete/statreg/96410_01#section6

http://www.bclaws.ca/civix/document/id/complete/statreg/96410_01