The Sale of Goods Act

Sale and agreement to sell.- (1) 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.

(2) A contract of sale may be absolute or conditional

(3) Where under a contract of sale the property in the goods in transferred from the seller to
the buyer, the contract is called a sale, but where the transfer of the property in the goods is to
take place at a future time or subject to some condition thereafter to be fulfilled, the contract is
called an agreement to sell.

(4) 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.

Contract of Sale how made -. (1) 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 of the price or both, or for the delivery or payment by
instalments, or that the delivery or payment or both shall be postponed.

(2) 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 partly by word of mouth or may
be implied from the conduct of the parties.

Existing or future goods.- (1) The goods which 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
upon a contingency which may or may not happen.

(3) Where 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.

Goods perishing before making of contract.- Where there is 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.

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.

Ascertainment of price.- (1) The price in a contract of sale may be fixed by the contract or may
be left to be fixed in manner thereby agreed or may be determined by the course of dealing
between the parties.

(2) Where the price is not determined in accordance with the foregoing provisions, the buyer
shall pay the seller a reasonable price. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case.

Agreement to sell at valuation.- (1) Where there is an agreement to sell goods on the terms
that the price is to be fixed by the valuation of a third party and such third party cannot or does
not make such valuation, the agreement is thereby avoided.
Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the
buyer, he shall pay a reasonable price therefor.

(2) Where such third party is prevented from making the valuation by the fault of the seller or
buyer, the party not in fault may maintain a suit for damages against the party in fault.

Stipulations as to time.- 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.
Whether any other stipulations as to time is of the essence of the contract or not depends on
the terms of the contract.

Condition and warranty.- (1) A stipulation in a contract of sale with reference to goods which
are the subject thereof may be a condition or a warranty.

(2) A condition is a stipulation essential to the main purpose of the contract, the breach of
which gives rise to right to treat the contract as repudiated.

(3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of
which gives rise to a claim for damages but not to a right to reject the goods and treat the
contract as repudiated.

(4) Whether a stipulation in a contract of sale is condition or a warranty depends in each case
on the construction of the contract. A stipulation may be a condition, though called a warranty
in the

When condition to be treated as warranty.- (1) Where a contract of sale is subject to any
condition to the fulfilled by the seller, the buyer may waive the condition or elect to treat the
breach of the condition as a breach of warranty and not as a ground for relating the contract as
repudiated.
(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 and not as a ground for rejecting the goods and treating the contract as repudiated,
unless there is a term of the contract, express or implied, to that effect.

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

"Unpaid seller" defined.- (1) The seller of goods is deemed to be an "unpaid seller" within the
meaning of this Act-

(a) When the whole of the price has not been paid or tendered.

(b) When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the conditions on which it was received has not been fulfilled by reason of the
dishonour of the instrument or otherwise.

(2) In this Chapter, the term "seller" includes any person who is in the position of a seller, as, for
instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or
agent who has himself paid, or is directly responsible for, the price.

Unpaid seller’s rights.- (1) Subject to the provisions of this Act and of any law for the for the
time being in force, notwithstanding that the property in the goods may have passed to the
buyer, the unpaid seller of goods, as such, has by implication of law.

(a) a lien on the goods for the period while he is in possession of them,

(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has
parted with the possession of them.

(c) a right of re-sale as limited by this Act.

Seller’s lien.-

(1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them
is entitled to retain possession of them until payment or tender of the price in the following
cases, namely :-

(a) where the goods have been sold without any stipulations as to credit.

(b) where the goods have been sold on credit, but the term of credit has expired.

(c) where the buyer becomes insolvent.

(2) The seller may exercise his right of lien notwithstanding that he in possession of the goods
as agent or bailee for the buyer.

Part delivery.- Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under such
circumstances as to show an agreement to waive the lien.

Termination of lien.-

(1) The unpaid seller of goods losses his lien thereon -

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to
the buyer without reserving the right of disposal of the goods.

(b) when the buyer or his agent lawfully obtains possession of the goods,
(c) by waiver thereof.

(2) The unpaid seller of goods, having a lien thereon, not lose his lien by reason only that he has
obtained a decree for the price of the goods.

Right of stoppage in transit.- Subject to the provisions of this Act, when the buyer of goods
becomes insolvent, the unpaid seller who has parted with the possession of the goods has the
right of stopping them in transit, that is to say, he may resume possession of the goods as long
as they are in the course of transit, and may retain them until payment or tender of the price.

Duration of transit.- (1) 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.

(2) 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.

(3) 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 for the goods may have been indicated by the buyer.

(4) 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.

(5) 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.
(6) 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.

(7) 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.

How stoppage in transit is effected.- (1) The unpaid seller may exercise his right to 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 later 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 is to his servant or agent in time to prevent
a delivery to the buyer.

(2) Whether 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.

Caveat Emptor - The principle termed as ‘caveat emptor’ means ‘buyer be aware’. Generally,
buyer is expected to be careful while purchasing the goods and seller is not liable for any
defects in goods sold by him. This principle in basic form is embodied in section 16 that subject
to provisions of Sale of Goods Act and any other law, there is no implied condition or
warranty as to quality or fitness of goods for any particular purpose. As per section 2(12),
“Quality of goods” includes their state or condition