Module 4: THE SALE OF GOODS ACT,1930

 INTRODUCTION:

 Sale of goods was originally a part of Contract Act 1872

 The term “sale” means “buying” and “selling”

 The term “goods” under the act means “moveable goods”.

 This act applies only for sale of moveable goods.

 Sale of Immoveable goods are governed by “The Transfer of

Property Act, 1882”

 Parties under Contract of Sale

Buyer Seller

 DEFINITION:

 GOODS [SECTION 2(7)]

 It means every kind of movable property

 Other than actionable claims and money
 And Includes
o stock,
o shares,
o growing crops,
o grass and things attached to or forming a part of the land which can be
severed before sale.

Actionable claims are debts which are eligible to enforce legal suit or legal action

Money is a mode of exchange and not goods

 TYPES OF GOODS:

Future Goods
Existing Goods Contingent Goods

Goods which exist in Goods which exist do not These are future good which
present or are ready for sell. exist at the time of contract. depends on a condition which
may or may not happen.

Specific Goods Generic Goods

Goods which are Goods which are indicated

identified and agreed by description and are not
upon at the time of separately identified
contract.

DOCUMENT OF TITLE OF GOODS [SECTION 2(4)]

 It is a legal document that proves that someone owns property or goods or has the
right to control of it.

 It includes
 Bill of lading
 Dock-warrant
 Warehouse keeper’s certificate
 Wharfinger’s certificate,
 Railway receipt
 Warrant or order for the delivery of goods or any documents used in the ordinary
course of business

 As a proof of possession or control of goods or authorizing or purporting to authorize

 Either by endorsement or delivery of goods.

PROPERTY [SECTION 2(11)

 It means “ownership” in the goods.

 Property can be either “general” or

“special”

 General property means ownership of

the goods and Special property means
some special interest in the goods.

 Upon sale, the property in the goods

passes from seller to the buyer.

SALE V/S AGREEMENT TO SELL

SALE AGREEMENT TO SELL

1 When the property in the goods is When the property in goods is not yet

transferred to the buyer transferred to the buyer

2 This is an Executed Contract. This is an Executory Contract

3 Property in the goods passes to the Property in the goods will pass in future.

buyer

4 The loss in the goods will be borne by The seller will have to bear the loss since

the buyer, even if the possession is the ownership is not transferred.

with the seller.

I agree to buy
10 quintal of
rice that will be
grown
Q1. HOW CONTRACT OF SALE IS MADE?

I] INTRODUCTION:

II] FORMATION OF CONTRACT OF SALE

1. An offer to sell and buy goods.

2. An acceptance to such offer

3. Payment of price either immediate or in installments

4. Delivery of goods either now or in future.

5. Contract for sale can be made either orally or in writing or by implied way.

6. In case of Government contracts must be in written form.

7. The price of the contract can b fixed by the contract or may be determined by the
course of dealing between the parties.
Q2. EXPLAIN CONDITIONS & WARRANTIES

I] MEANING

 A contract of sale contains some stipulations (conditions or requirements that form a

part of agreement)

Condition Warranty

Conditions those are essential to Warranty is collateral / connected to the

main contract main contract

If conditions not performed, If warranty not performed, contract

contract can be repudiated cannot be repudiated but can claim
damages

II] IMPLIED CONDITIONS:

1. IMPLIED CONDITION AS TO TITLE

-There is an implied condition on the part of the seller that the seller
has the right to sell the goods and that he has title to the goods.

-If the seller has no title and the buyer has to give up the goods to the
real owner then buyer is entitled to get return to the price of goods.

2. IMPLIED CONDITION ON SALE BY DESCRIPTION

-There is an implied condition for the sale of goods by

description that the goods shall correspond to the description.

-If the goods does not correspond with the description than the
buyer has the right to repudiate the contract.

3. IMPLIED CONDITION ON SALE BY SAMPLE

-There is an implied condition for the sale of goods by sample that the
goods shall correspond to the sample provided.

-If the goods does not correspond with the sample provided than the
buyer has the right to repudiate the contract.
4. IMPLIED CONDITION AS TO QUALITY OR FITNESS

Generally there is no implied warranty or condition as to the quality

or fitness of any goods except:

(i) the buyer makes the seller know the particular purpose for the which the goods are
required

(ii) the buyer relies on the skill and judgement of the seller

(iii) there is an implied condition that the goods are of merchantable quality

Here, the English maxim “Caveat Emptor” i.e “Let the buyer be aware” applies.

III] IMPLIED WARRANTY:

1. IMPLIED WARRANTY OF QUITE POSSESSION:

-There is an implied warranty under the contract of sale, that after sale
the buyer shall enjoy quite and peaceful possession of the goods.

-If there is a breach of this warranty the seller is liable to pay damages to the buyer.

2. IMPLIED WARRANTY THAT GOODS ARE FREE FROM ENCUMBRANCES

-The word “encumbrances” include pledge, charge, lien, interest on the goods.

-There is an implied warranty under the contract of sale, that the goods sold are free
from all encumbrances.

-If there is a breach of this warranty the seller is liable to pay damages to the buyer.

IV] REMEDIES IN CASE OF BREACH:

Breach of Condition Breach of Warranty

Repudiate the contract Cannot repudiate the

contract, but can claim
damages
Q3. EXPLAIN THE DOCTRINE OF “CAVEAT EMPTOR”

I] MEANING:

 “Caveat Emptor” means “Buyer must take care/ Buyer Beware”

 The general rule is the buyer purchases the goods at this own risk relying upon his
own skill and judgment.

 In contract of sale, there is no implied warranty and condition as to the quality and
fitness of the goods.

II] EXCEPTIONS:

(i) Custom or Usage of Trade

 There is an implied condition as to the quality or fitness for a particular purpose by

usage of trade or custom.
Eg. A bought goods from B in an auction of the contents of a ship. But B did not
inform A the contents were sea damaged, and so the rules of the doctrine will not
apply here.

(ii) Fraud

 Where the seller is guilty of fraud, for concealing the defects in the
goods, for giving false statement, then the seller is liable

(iii) For Specific Purpose

 When the buyer makes the seller know the particular purpose for which the goods
are required or the buyer relies on the skill and judgment of the seller, then the seller
is liable for wrong delivery of goods.

(iv) Merchantable quality

 It means “commercially saleable” quality

 There is an implied condition that the goods shall be of merchantable quality. And in
case damaged, defective goods the seller shall be liable.
Q4. TRANSFER OF PROPERTY BETWEEN BUYER AND SELLER

I] MEANING

 Transfer of property means transfer of “ownership” in the goods.

 Property means “general property” in the goods and not “special property”

 On sale, along with the goods, the ownership, possession and the risk in the goods
gets transferred.

 Thus, Risk follows with ownership.

Sale of Goods
BUYER SELLER
Ownership in goods

Possession in goods

Risk in goods

II] RULES RELATING TO TRANSFER OF PROPERTY

(i) Goods must be ascertained [Section 18]

In case of contract of sale, no property in the goods is transferred unless and until the
goods are ascertained (existing)

(ii) Property passes when intended to pass [Section 19]

In case of contract of sale, the property in the goods are transferred at such time when
parties to the contract intent (wishes) to transfer.

(iii) Sale of specific goods in deliverable state [Section 20]

In case of contract of sale, the goods must be in a deliverable state i.e. in such state
when a buyer can take the delivery of goods.

(iv) Specific goods to be put into a deliverable state [Section 21]

If the goods are not in a deliverable state, the seller is bound to do something to put the
goods in a deliverable state for the property to pass to the buyer.
(v) When seller has to ascertained price of the goods [Section 22]

When the seller is bound to weigh, measure, test or to do some other act for the purpose
of ascertaining the price of the goods, then the goods shall not be transferred unless
such thing has been done.
Q5. RIGHTS OF UNPAID VENDOR/SELLER

I] MEANING

Section 45 defines unpaid seller as

 One who has not been paid or received the whole price OR

 One who receives a bill of exchange or other negotiable instrument as

conditional payment and the same has been dishonored OR

 One who has been partly paid

II] RIGHTS OF UNPAID SELLER

I] WHERE THE PROPERTY II] WHERE THE PROPERTY IN III] AGAINST BUYER
IN GOODS HAS PASSED GOODS HAS NOT PASSED PERSONALLY

LIEN STOPPAGE RE-SALE

IN TRANSIT
WITH-HOLD DELIVERY

Suit for price Suit for damages Repudiation of Suit for interest
contract

A] WHERE THE PROPERTY IN GOODS HAS PASSED:

1. RIGHT OF LIEN [Section 47]:

 Right to lien means “right to retain” or “right to take back”

the possession of goods or property until the claim is paid or
satisfied.
 Unpaid seller has right to retain the goods until all claims of
the holder are satisfied
2. STOPPAGE IN TRANSIT [SECTION 50]:

 The unpaid seller who has parted with the possession of the
goods has the right to stopping the goods in the course of
transit, if the payment is not received.
 The unpaid seller can retain the goods until the payment is
received.

3. RE-SALE:

The unpaid seller has exercised right of lien or stoppage in transit, has
the right to re-sale after giving reasonable notice and time to the buyer
to pay the unpaid amount and on failure to repay the unpaid seller will
have right to re-sale the goods.

B] WHERE THE PROPERTY IN GOODS HAS NOT PASSED:

1. WITH HOLDING DELIVERY:

Where the property in goods has not passed to the buyer, the unpaid seller
has right to with-hold delivery until the payment has received.

C] AGAINST THE BUYER PERSONALLY:

1. SUIT FOR PRICE:

When the property has passed to the buyer and the buyer wrongfully neglects or refuses
to pay the price of goods, the seller may sue him for the price of the goods.

2. SUIT FOR DAMAGES:

When the buyer wrongfully neglects or refuses to pay for the goods. The seller may sue
him for non-acceptance.

3. REPUDIATION OF CONTRACT:

On non-receipt of payment the seller shall have the right to treat the contract
repudiated and sue for damages for the breach.

4. SUIT FOR INTEREST:

When there is a specific agreement between the seller and the buyer as to the interest
on the price of the goods on delayed payment, then the seller shall have the right to file
suit for interest
Q6. EXPLAIN AUCTION SALES [SECTION 64]

1. Sale by auction is a public sale where

intending buyers outbid each other and goods
are sold to the highest bidder.

2. The proposed auction is duly advertised with

the terms of sale.

3. On appointed day and time, the intending

buyer assemble at the determined place and
the auctioneer puts the goods to auction and
invites bid from the intending buyer.

4. Every bid is an offer.

5. The auction goes in favour of the highest

bidder.

6. The highest bid is accepted by the

auctioneer in most customary manner i.e. “by
fall of a hammer” or “one, two, three”

7. The highest bid is the offer and the fall of

hammer is the acceptance.

8. The auctioneer can reserve the right to refuse

the highest bid at its discretion.

9. Before the final acceptance of the bid, the

bidder has the right to withdraw his bid.

10. The auctioneer who sells the goods by auction

is the agent of the owner of the goods.

11. The sale may be subject to reserve price i.e. the

auctioneer will not sell the goods below certain
price.

12. If the seller uses “pretending bid” to raise the

price, the sale is voidable at the option of the
buyer.