Business Law

The Sale of goods act, 1930

Prof. Anjali Aurangabadkar

The sale of goods act
 Contract for Sale of Goods - Meaning -
Essentials of a Contract of Sale -
 Formalities of a Contract of sale.
 Provisions relating to conditions and
Warranties, Provisions relating to transfer
of property or ownership
 Provisions relating to performance of
Contract of Sale –
 Rights of Unpaid Seller – Rules as to
delivery of goods.
Contract for Sale of Goods

 “Sale” – A contract of sale of goods is

a contract whereby the sellers transfers
or agrees to transfer the property in
goods to the buyer for price
Essentials of contract of sale
1. There must be at least two parties
2. Transfer or agreement to transfer the
ownership of the goods
3. The subject matter of the contract must
necessarily be goods
4. The consideration is price
5. A contract of sale may be absolute or
conditional
6. All other essentials of a valid contract must
be present
 Goods
 “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 severed before sale or under the
contract of sale
 Documents of title to Goods
 A document of title to goods may be described as
any document used as proof of the possession or
control of goods, authorizing or purporting to
authorize, either by endorsements or by delivery,
the possessor of the document to transfer or
receive goods thereby represented
 Following documents are regarded as the title to the
goods
 Bill of lading
 Dock warrant
 Ware housekeeper's certificate
 Wharfinger’s certificate
 Warrant or order for the delivery of the goods
 And any other document used in the ordinary
course of business as a document of title
Classification of goods
 Goods may be classified as
1. Existing goods- existing goods are those
which are owned or possessed by the seller
at the time of the contract.
existing goods may be either;
1. Specific and Ascertained or,
2. Generic and Ascertained
 Existing goods-
 “Specific goods” means goods identified and
agreed upon at the time a contract of sale is
made
 “Ascertained Goods” – identified in accordance
with the agreement after the time a contract of
sale is made
 Generic or Unascertained Goods – are the
goods indicated by description and not
specifically identified
Classification of goods
 Future goods – “future goods” means goods
to be manufactured or produced or acquired
by the seller after making the contract of sale
 Contingent goods – contingent goods are the
goods the acquisition of which by the seller
depends upon a contingency which may or
may not happen
Delivery – its forms and derivatives
 Delivery must be of three kinds
 Actual Delivery
 Constructive Delivery
 Symbolic Delivery
 Sale v/s Agreement to sell
Sale
1. It is an executed contract for
which the consideration has
been paid.
2. It effects a transfer of general
property in goods, and creates
a right in rem
3. If the goods are destroyed, the
loss falls on the buyer even
though the goods are in the
possession of the seller.
4. If the buyer commits a breach,
the seller can sue for the price
of the goods
Agreement to sell
1. It is an executory contract i.e.
for which consideration has to
be paid at a future date.
2. It does not affect a transfer of
general property in the goods,
and merely creates a right in
personum.
3. If the goods are destroyed, the
loss falls on the seller even
though the goods are in the
possession of the buyer
4. If the buyer commits the
breach the seller can sue for
damages
5. If the seller commits a breach: 5. If the seller commits a breach,
a) the buyer has a personal the buyer has only a personal
remedy against the seller for remedy against the seller for
damages. b) the buyer has all damages from the seller.
the remedies which an owner of
goods has, e.g. a suit for
conversion or detinue. c) in
some cases the buyer can
follow goods in the hands of the
third persons also.
6. If the seller wrongfully re- sells, 6. The seller may resale goods
he becomes guilty of to third persons, but in that
conversation, and the buyer can case, the buyer can claim
recover the goods, even from a damages from the seller.
third person.
7. If the buyer becomes insolvent 7.
before he pays for the goods,
the seller in the absence of a
lein over the goods, must return
them to the official receiver of
Assignee. He can only claim a
ratable dividend for the price of
the goods.
8.
8. If the seller becomes insolvent,
the buyer is entitled to recover
the goods from the Official
Assignee or Receiver
If the buyer becomes
insolvent and has not yet
paid the price, the seller is
not bound to part with the
goods until he is paid for.
If the buyer, who has paid
the price, finds that the
seller has become
insolvent, he can only claim
a ratable dividend.
 Formalities of contracts of sale

 A) Modes of formation: A contract of sale may be

made in any of the following modes:
 There may be immediate delivery of the goods; or
 There may be immediate payment of price, but it may
be agreed that the delivery is to be made at some
future date; or
 There may be immediate delivery of the goods and an
immediate payment of price; or
 It may be agreed that the delivery or payment or both
are to be made in installments ; or
 It may be agreed that the delivery or payment or both
are to be made at some future date
 B) Subject matter of the contract of sale : the subject matter is
always the goods.
 The subject matter of the contract must always be goods. The
goods may be existing or future goods.
 Like an ordinary contract, a contract of sale of goods can also be
made with regard to the goods, the acquision of which by seller
depends upon a contingency, which may or may not happen.
Thus, a contract for sale of certain cloth to be manufactured by a
certain mill is a valid contract. Such contracts are called
contingent contracts.
 When the seller purports by his contract of sale to effect a sale of
future goods, the contract will operate only as an agreement to
sell the goods and not as sale.
 C) Destruction of subject matter of a contract
 Goods are not existing at the time of the contract: if at
the time a contract of sale is entered into, the subject
matter of a contract being specific goods, which without the
knowledge of the seller have been destroyed or so
damaged as not to answer to the description in the
contract, and then the contract is void.
 Goods perishing after the contract is made : where
there is an agreement to sell specific goods and the goods,
subsequently without any fault of the seller or the buyer
perish or suffer such damages as not to answer to the
description in the agreement before the risk passes to the
buyer, the agreement is avoided
 D) Ascertainment of the price :
 ‘Price’ means the monetary consideration of the sale of
the goods
 The price may be:
 A) Fixed by the contract
 B) agreed to be fixed in a manner provided by the
contract e.g. by a valuer
 C) Determined by the course of dealings between the
parties
 E) Stipulation as to time
 As regard time for the payment of price,
unless a different intension appears from the
terms of the contract, stipulation as regard
this, is not deemed to be the essence of the
contract of sale. But delivery of goods must
be made without delay. Whether or not such
a stipulation is of the essence of a contract
depends upon the terms agreed upon
 Conditions and Warranties
Conditions
1. A condition is essential to
the main purpose of the
contract.
2. The aggrieved party can
repudiate the contract or
claim damages or both in
the case of breach of
condition
3. A breach of condition may
be treated as breach of
warranty
Warranty
1. It is only collateral to the
main purpose of the
contract
2. The aggrieved party can
claim only damages in
case of breach of warranty
3. A breach of warranty
cannot be treated as a
breach of condition.
Conditions and warranties
 When breach of condition can be treated as
breach of warranty
1. Where the buyer altogether waives the performance of the
condition
2. Where the buyer elects to treat the breach of the condition as
one of the warranty i.e. he may only claim damages instead of
repudiating the contract
3. Where the contract is non severable and the buyer has
accepted either the whole goods or any part thereof
4. Where the fulfillment of any condition or warranty is excused
by law of reason of impossibility or otherwise. The provision is
specially made for covering cases of non- fulfillment due to
war, governmental restrictions etc.
Conditions and warranties
 Express and Implied conditions and
warranties
 Conditions and warranties may be either
express or implied.
 Express conditions are those, which are
agreed upon between the parties at the time
of the contract and are expressly provided in
the contract.
 An implied condition may be negated or
waived by an express agreement
Conditions and warranties
 Following are the implied conditions in a
contract unless the circumstances of the
contract show a different intention
1. Conditions as to title
2. Sale by description
3. Sale by sample
4. Sale by sample as well as description
5. Condition as to quality or fitness
Caveat Emptor
 In case of Sale of goods, the doctrine ‘Caveat
Emptor’ means ‘let the buyer beware’. When
sellers display their goods in the open
market, it is for buyer to make proper
selection or choice of the goods. It is the duty
of the buyer to satisfy himself before buying
the goods that the goods will serve the
purpose for which they are being bought. If
the goods turn out to be defective he cannot
hold the seller liable.
Provisions relating to transfer of
property or ownership
 Nemo Dat Quod Non Habeat – no one can give what he has
not the owned
 Exceptions
 Sale with the consent of the authority of the owner
 Title by estoppel
 Sale by a merchantile agent
 Sale by one of the joint owner
 Sale by a person in posession under a voidable contract
 Sale by seller in possession after sale
 Sale by buyer in possession before the propertyhas vested in him
 Sale by an unpaid seller
 Sale under the provisions of other Acts
Performance of the contract
 A)Rule regarding Delivery of the goods
1. Effect of part delivery
2. Buyer to apply for delivery
3. Place of delivery
4. Time of delivery
5. Goods in possession of a third party
6. Time for tender of delivery
7. Expenses of delivery
8. Delivery of wrong quantity
9. Installment deliveries
10. Delivery to carrier
11. Deterioration during transit
12. Buyer’s right to examine the goods
Performance of the contract
 B) Acceptance of Delivery of goods
 Acceptance is deemed to take place when the
buyer does the following
 Intimates the seller that he had accepted the
goods; or
 Does any act to the goods, which is inconsistent
with the ownership of the seller; or
 Retains the goods after the lapse of a reasonable
time, without intimating to the seller that he has
rejected them
Unpaid Seller
 The seller of the goods is deemed to be an “Unpaid
Seller” in the following circumstances
 The whole of the price has not been paid or
tendered and the seller had an immediate right of
action for the price
 Bill of exchange or other negotiable instrument was
given as payment but the same has been
dishonoured, unless this payment was an absolute,
and not a conditional payment.
 Any person who is in a position of a seller, is also a
seller, and may exercise the rights conferred upon
an ‘unpaid seller’ in above said circumstances
 Rights of an Unpaid Seller
 RIGHTS OF AN UNPAID SELLER

(A) Right against the goods (B) Right against the Buyer

(i) Right of lein (ii) Right of (iii) Right of

Stoppage resale
In transit

(i) Suit for price (ii) Suit for (iii) Repudiation (iv) Suit for
Damages Of contract interest