Sales Goods

Kunal Mandhania CAWALLAH
SALE OF GOODS
ACT, 1930
Introduction
 The Sale of Goods Act, 1930 deals with the laws relating to sale of goods in India .
 The provisions of the Act are applicable to the contracts related to the sale of goods which
means movable properties.
 The Act is not applicable for the sale of immovable properties like land, fields, shop or
house etc.
 For immovable property, Transfer of Property Act, 1882 is applicable.
 Sale of Goods Act, 1930 deals only with movable property.
 Came into force from 1st July 1930
 This act deals with all the contracts of sale of goods, but does not deal with the contract
of sale of service or pledge of goods, mortgage of property or barter of goods
 It covers both a sale as well as agreement to sell goods
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Unit 1
1 FORMATION OF
CONTRACT OF SALE
CONTRACT OF SALE [Sec. 4 (1)]

A contract whereby seller transfers agrees to transfer Property in goods to Buyer for Price.
Essential elements /Features /Characteristics of contract of Sale (T/Q | A)
2 Parties Transfer of Goods Price Essential elements

Property of valid contract
Buyer & Ownership Subject Consideration As per Sec 10 of

transfer with matter of should be present Contract Act
Seller
transfer in contract of
∴ SOGA does not
property sale
apply to gifts &
barter system
The following elements must co-exist so as to constitute a contract of sale of goods under
the Sale of Goods Act, 1930 (sec 4)
i. There must be at least two parties, the seller and the buyer and the two must be different
persons. A person cannot be both the seller and the buyer and sell his goods to himself.
ii. The subject matter of the contract must necessarily be goods covering only movable property.
It may be either existing goods, owned or possessed by the seller or future goods.
iii. A price in money (not in kind) should be paid or promised. But there is nothing to prevent the
consideration from being partly in money and partly in kind.
iv. A transfer of property in goods from seller to the buyer must take place. The contract of sale
is made by an offer to buy or sell goods for a price by one party and the acceptance of such
offer by other.
v. A contract of sale may be absolute or conditional.
vi. All other essential elements of a valid contract must be present in the contract of sale, e.g.
free consent of parties, competency of parties, legality of object and consideration etc
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How Contract of Sale is made (Section 5)
A contract of sale may be made in any of the following modes:

i. Contract of sale is made by an offer to buy or sell goods for a price and acceptance
of such offer.
ii. There may be immediate delivery of the goods; or
iii. There may be immediate payment of price, but it may be agreed that the delivery is
to be made at some future date; or
iv. There may be immediate delivery of the goods and an immediate payment of price ,
or
v. It may be agreed that the delivery or payment or both are to be made in instalments; or
vi. It may be agreed that the delivery or payment or both are to be made at some future date.
DISTINCTION BETWEEN SALE AND AN AGREEMENT TO SELL

Where under a contract of sale, the property in the goods is 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, it is called an agreement to sell.
[Section 4(3)]
Basis Sale Agreement to sell
Transfer of The property in the goods passes to Property in the goods passes to the
property the buyer immediately. buyer on future date or on fulfilment of
some condition.
Nature of It is an executed contract i.e. It is an executory contract i.e. contract
contract contract for which for which consideration is to be paid at
consideration has been paid. a future date.
Remedies for The seller can sue the buyer for the The aggrieved party can sue for
breach price of the goods because of the damages only and not for the price,
passing of the property therein to unless the price was payable at a stated
the buyer. date.
Liability of A subsequent loss or destruction of Such loss or destruction is the liability of
parties the goods is the liability of the buyer. the seller.
Burden of risk Risk of loss is that of buyer since risk Risk of loss is that of seller.
follows ownership.
Nature of rights Creates Jus in rem means right Creates Jus in personam means rights
against the whole against a particular party to the contract
world.
Right of resale The seller cannot resell the goods. The seller may sell the goods since
ownership is with the seller.
In case of The official assignee will not be able The official assignee will acquire control
insolvency of to take over the goods but will over the
seller recover the price from the buyer.
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goods but the price will not be

recoverable.
In case of The official assignee will have The official assignee will not have any
insolvency of control over the goods. control over the goods.
buyer
Practical Question
Sonal went to a Jewellery shop and asked the sales girl to show her diamond bangles with Ruby
stones. The Jeweller told her that we have a lot of designs of diamond bangles but with red stones
if she chooses for herself any special design of diamond bangle with red stones, they will replace
red stones with Ruby stones. But for the Ruby stones they will charge some extra cost. Sonal
selected a beautiful set of designer bangles and paid for them. She also paid the extra cost of Ruby
stones. The Jeweller requested her to come back a week later for delivery of those bangles. When
she came after a week to take delivery of bangles, she noticed that due to Ruby stones, the design
of bangles has been completely disturbed. Now, she wants to terminate the contract and thus,
asked the manager to give her money back, but he denied for the same. Answer the following
questions as per the Sale of Goods Act, 1930.
(i) State with reasons whether Sonal can recover the amount from the Jeweller.
(ii) What would be your answer if Jeweller says that he can change the design, but he will charge
extra cost for the same? [May 2022 (6 Marks)] [RTP Dec 2023] (7 Marks) (MTP July 24)
Law As per Section 4(3) of the Sale of Goods Act, 1930, where under a contract of sale,
the property in the goods is 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 and as per Section 4(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
Conclusion i. On the basis of above provisions and facts given in the question, it can be
said that there is an agreement to sell between Sonal and Jeweller and
not a sale. Even though the payment was made by Sonal, the property in
goods can be transferred only after the fulfilment of conditions fixed
between the buyer and the seller. As due to Ruby Stones, the original
design is disturbed, bangles are not in original position. Hence, Sonal has
right to avoid the agreement to sell and can recover the price paid.
ii. If Jeweller offers to bring the bangles in original position by repairing, he
cannot charge extra cost from Sonal. Even though he has to bear some
expenses for repair; he cannot charge it from Sonal.
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Sale vs Contract for work and labour

A contract of sale of goods is one in which some goods are sold or are to be sold for a price. But
where no goods are sold, and there is only the doing or rendering of some work of labour, then the
contract is only of work and labour and not of sale of goods.
(1) Where gold smith is given gold for making ornament.
(2) Artist making a painting.
(3) Contract of maintenance of computers which covers not only maintenance of computers
but also supply of shares.
(4) A lady gave a plain saree to Jariwala brothers for embroiding with Jari.
Sale vs Bailment
A "bailment" is a transaction under which goods are delivered by one person (the Bailor) to another
(the bailee) for some purpose, upon a contract that they be returned or disposed of as directed after
the purpose is accomplished.
Shortcut: Gave P C to P OO R for USE as Bailment
BASIS OF
SALE BAILMENT
DISTINCTION
1. Parties Parties involved in a sale contract are Parties involved in a bailment
called seller and buyer. agreement are called bailor and
bailee.
2. Consideration Consideration is price in terms of Bailment may be gratuitous or non-
money. gratuitous.
3. Transfer of Possession of goods may or may not Possession of the goods is
possession be transferred immediately at the immediately given to the bailee at
time of contract. the time of the contract.
4. Transfer of The ownership of the goods is Only possession of the goods is
ownership/Prop transferred from the seller to the transferred from the bailor to the
erty buyer. bailee and not ownership.
5. Return of goods Goods are not returned to the seller When the purpose of bailment is
in sale. over, the goods must be returned
by the bailee to the bailor.
6. Use of goods Buyer may use the goods according Bailee must use the goods in
to his own choice. accordance with the terms and
conditions of bailment.
DISTINCTION BETWEEN SALE AND HIRE PURCHASE AGREEMENT

i. A "hire purchase agreement" is basically a contract of hire, but in addition, it gives the hirer an
option to purchase the goods at the end of the hiring period.
ii. It is an agreement under which
(a) Possession of goods is delivered by the owner thereof to a person on condition that such
person pays the agreed amount in periodical instalments, and
(b) The property in the goods is to pass to such person on the payment of the last of such
instalments, and
(c) Such person has a right to terminate the agreement at any time before the property so passes;
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Shortcut: Sent P A R R O T to W I for Hire Purchase
BASIS OF SALE HIRE-PURCHASE AGREEMENT

DIFFERENCE
1. Sales tax/ Sales tax is levied at the time of making
Sales tax cannot be levied unless it
GST a contract. becomes a sale.
2. Possession of Possession of the goods need not be Possession of the goods is
the goods transferred immediately. transferred immediately.
3. Governing Governed by 'The Sale of Goods Act, Governed by 'Hire Purchase Act,
Act 1930' 1972'
4. Right to The seller has no right to repossess the
The hire-vendor has a right to
repossess the goods on breach. He can sue for the repossess the goods if the hirer
goods price only. defaults in the payment.
5. Resale The buyer can resale the goods as heHirer cannot resale goods before
is the owner of goods. the payment of last installment.
6. Transfer of Ownership is transferred immediately.
Ownership is transferred on the
ownership payment of the last installment.
7. Right to The buyer has no right to terminate the The hirer has right to terminate the
terminate contract of sale by returning the agreement at any time by returning
goods. the goods.
8. Writing A contract of sale need not necessarily The hire-purchase agreement must
be in writing. be in writing.
9. Payment The payment made by the buyer in Installment paid by the hirer is
made by installment is treated as payment of treated as hire charges for use of
installment price of the goods. goods.
10. Nature Executed contract Executory contract
Practical Question
State the nature of the transaction in each of the following cases:
(a) A dentist makes a set of false teeth for his patient with materials wholly found by the
dentist and the buyer agrees to pay ` 2,000 when they are properly fitted into his mouth.
(b) A Customer gives his tailor a length of suiting and requires him to make a suit for him,
the lining materials and the buttons to be supplied by the tailor.
(c) A member of a recreation club takes home a supply of certain provisions from the club
store, the payment to be made along with the subscription for the month.
(d) A dealer in bicycles gives a 'Hercules' bicycle to a customer on the terms that ` 100
should be paid by him then and there and balance ` 375 in five equal monthly instalments.
Solution
(a) As all the conditions are satisfied the contract amounts to sale.
(b) It is contract of work and labour and not sale as the material is supplied by the consumer and
main intention is service
(c) All the conditions are satisfied thus the contract amounts to sale
(d) The contract amounts to sale as all the conditions are satisfied
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A hirer, who obtains possession of a refrigerator from its owner under a hire
purchase agreement, sells the refrigerator to a buyer who buys in good faith and
without notice of the right of the owner. Does this buyer get a good title to the
refrigerator? State reasons for your answer
Hint
No, as hirer cannot pass good title to any 3rd person unless he himself doesn’t get it
Subject matter of Contract of sale - Goods Sec. 2(7)

 "Goods" means 'every kind of movable property.
 Sale and purchase of immovable property is not covered by this Act.
IT INCLUDES IT EXCLUDES
1. Stock and shares 1. Actionable
2. Growing crops claims
3. Grass and things attached to or forming part of land, which are agreed to 2. Money
be severed before sale. 3. Immovable
4. Rare, old and antique coins property
5. Goods like patents, copyright, trademark, goodwill, license, water, gas,
electricity.
Note: Actionable Claim means which can be claimed by action or suit. E.g. Debt.
Types of Goods. [Sec.6] (C)

1. Existing Goods
(a) These are goods which are in existence at the time of contract of sale.
(b) Such goods are in the ownership and in possession of the seller at the time he makes
sale.
(i) Specific Goods

Goods which are identified and agreed by the parties at the time of the contract of sale are specific
goods.
1: If “A” goes to a Television show room and identifies a TV of his own choice it is “Specific
Goods”.
2: ‘A’ had five cars of different models. He agreed to sell his ‘Santro’ car to ‘B’ and ‘B’
agreed to purchase the same car. In this case, the sale is for specific goods as the car
has been identified and agreed at the time of the contract of sale
(ii) Unascertained Goods

Generic or unascertained goods are 'goods defined only by description or sample and not
specifically identified and separated at the time of the formation of contract.
1: If A agrees to sell to B one packet of salt out of the lot of one hundred packets lying in
his shop, it is a sale of unascertained goods because it is not known which packet is to be
delivered. As soon as a particular packet is separated from the lot, it becomes ascertained
or specific goods.
2: X has ten horses. He promises to sell one of them but does not specify which horse he
will sell. It is a contract of sale of unascertained goods
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(iii) Ascertained Goods

Goods which are ascertained and identified in accordance with the agreement after the formation
of the contract are called ascertained goods.
A wholesaler of cotton has 100 bales in his godown. He agrees to sell 50 bales and these
bales were selected and set aside. On selection, the goods becomes ascertained. In this
case, the contract is for the sale of ascertained goods, as the cotton bales to be sold are
identified and agreed after the formation of the contract. It may be noted that before the
ascertainment of the goods, the contract was for the sale of unascertained goods.
2. Future Goods
(a) "Future Goods" means 'goods which are not in existence at the time of contract. These
goods are to be manufactured or acquired by the seller after the contract of sale is
made'.
(b) Since, these goods are not in ownership and possession of the seller, the seller cannot
make sale of these goods.
(c) Rather, agreement to sell is made for these goods.
P agrees to sell to Q all the milk that his cow may yield during the coming year. This is a
contract for the sale of future goods
3. Contingent Goods
(a) These are goods which are also not in existence at the time of contract like future goods.
(b) The acquisition of contingent goods by the seller depends upon happening or non-
happening of an uncertain event which may or may not happen.
Module Question-Classify the following transactions according to the types of goods

they are:
(i) A wholesaler of cotton has 100 bales in his godown. He agrees to sell 50 bales
and these bales were selected and set aside.
(ii) A agrees to sell to B one packet of sugar out of the lot of one hundred packets
lying in his shop.
(iii) T agrees to sell to S all the apples which will be produced in his garden this
year. (MTP May 24)
Hint
(i) A wholesaler of cotton has 100 bales in his godown. So, the goods are existing
goods. He agrees to sell 50 bales and these bales were selected and set aside.
On selection, the goods becomes ascertained. In this case, the contract is for
the sale of ascertained goods, as the cotton bales to be sold are identified and
agreed after the formation of the contract.
(ii) If A agrees to sell to B one packet of sugar out of the lot of one hundred packets
lying in his shop, it is a sale of existing but unascertained goods because it is
not known which packet is to be delivered.
(iii) T agrees to sell to S all the apples which will be produced in his garden this
year. It is contract of sale of future goods, amounting to 'an agreement to sell.'
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EFFECT OF DESTRUCTION OF GOODS

The effect of destruction of subject-matter may be discussed as under:
1. Goods perishing before making of the contract [Section7]:
Sometimes, the goods have already been perished before making of the contract of sale. In such
cases, the contract of sale is void-ab-intio if the contract is for the sale of specific goods, and the
seller had no knowledge of the perishing of the goods. This principle is based on the rule of
impossibility of performance of contract.
A agreed to sell to B 100 bags of cement lying in his godown. In fact, that cement had
already been destroyed by leakage of water and has been converted into stone. But this
fact was not known to the seller (A). in this case, the contract of sale is void-ab-intio.
2. Goods perishing after an agreement to sell, but before the sale is completed [Section 8]:
Sometimes, the goods perish after an agreement to sell is made but before the completion of the
sale. In such cases, the contract of sale becomes void if the contract is for the sale of specific
goods and the goods are destroyed without any fault of the seller or buyer.
A delivered a horse to B for trial for 8 days. It was agreed that the sale would be completed
if the horse was found suitable for B’s purpose. The horse died on the third day without any
fault of either party. It was held that the contract was void and A could not recover the price
from B.
Perishing of future goods: If the future goods are specific, the destruction of such goods will amount
to supervening impossibility and the contract shall become void.
A agrees to sell B 100 tons of tomatoes grown on his land next year. But the crop failed due
to some disease in plants and A could only deliver 80 tons of tomatoes to B. It was held A
was not liable as the performance of contract became impossible due to supervening
impossibility.
1. Both the Sections 7 and 8, discussed above, apply only to specific and ascertain
goods. If the contract is for the sale of ‘unascertained goods’, then the contract shall
not become void even if the entire stock of goods is destroyed. And the parties remain
liable to fulfill their obligations.
2. Perishing of future goods: If the future goods are specific, the destruction of such
goods will amount to supervening impossibility and the contract shall become void.
What are the consequences of destruction of specified goods, before making of contract
and after the agreement to sell under the Sale of Goods Act, 1930. [May 2022 (4 Marks)]
[RTP Dec 2023]
Practical Question
A agrees to sell to B 100 bags of sugar arriving on a ship from Australia to India within next two
months. Unknown to the parties, the ship has already sunk. Does B have any right against A under
the Sale of Goods Act, 1930? (ICAI Module)
Law Section 8 of the Sales of Goods Act, 1930 provides that where there is an agreement
to sell specific goods and the goods without any fault of either party perish, damaged
or lost, the agreement is thereby avoided. This provision is based on the ground of
supervening impossibility of performance which makes a contract void
Conclusion In this case, B, the buyer has no right against A the seller because all the following
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conditions required to treat it as a void contract are fulfilled in the above case:
(i) There is an agreement to sell between A and B
(ii) It is related to specific goods
(iii) The goods are lost because of the sinking of ship before the property or risk
passes to the buyer.
(iv) The loss of goods is not due to the fault of either party
PRICE AND MODES OF FIXING THE PRICE

‘Price’ means the monetary consideration for sale of goods [Section 2 (10)]. By virtue of Section 9,
the price in the contract of sale may be-
1. fixed by the contract, or
2. agreed to be fixed in a manner provided by the contract, e.g., by a valuer, or
3. determined by the course of dealings between the parties.
Agreement to sell at valuation (Section 10):
Section 10 provides for the determination of price by a third party.
1. Where there is an agreement to sell goods on the terms that price has to be fixed by the third
party and he either does not or cannot make such valuation, the agreement will be void.
2. In case the third party is prevented by the default of either party from fixing the price, the party at
fault will be liable to the damages to the other party who is not at fault.
3. However, a buyer who has received and appropriated the goods must pay a reasonable price for
them in any eventuality.
 A agreed to sell his 100 bags of rice to B at a price to be fixed by C. But C failed to fix
the price. In this case, the agreement becomes void on C’s failure to fix the price.
 A agreed to sell his 100 quintals of wheat to B at a price to be fixed by C. C is willing of
the goods. In this case, B can claim damages from A.
P is having two bikes. He agrees to sell both of the bikes to S at a price to be fixed by the
Q. He gives delivery of one bike immediately. Q refuses to fix the price. As such P ask S
to return the bike already delivered while S claims for the delivery of the second bike too.
In the given instance, buyer S shall pay reasonable price to P for the bike already taken.
As regards the Second bike, the contract can be avoided
Practical Question
A agrees to buy a new TV from a shop keeper for r 30,000 payable partly in cash of 20,000 and
partly in exchange of old TV set. Is it a valid Contract of Sale of Goods? Give reasons for your
answer.(ICAI Module)
Law As per sec 9,It is necessary under the Sales of Goods Act, 1930 that the goods
should be exchanged for money. If the goods are exchanged for goods, it will not
be called a sale. It will be considered as barter. However, a contract for transfer of
movable property for a definite price payable partly in goods and partly in cash is
held to be a contract of Sale of Goods
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Conclusion In the given case, the new TV set is agreed to be sold for ` 30,000 and the price is
payable partly in exchange of old TV set and partly in cash of ` 20,000. So, in this
case, it is a valid contract of sale under the Sales of Goods Act, 1930.
Practical Question
X contracted to sell his car to Y. They did not discuss the price of the car at all. X later refused to
sell his car to Y on the ground that the agreement was void being uncertain about price. Can Y
demand the car under the Sale of Goods Act, 1930? (ICAI Module)
Law Payment of the price by the buyer is an important ingredient of a contract of sale. If
the parties totally ignore the question of price while making the contract, it would
not become an uncertain and invalid agreement. It will rather be a valid contract
and the buyer shall pay a reasonable price
Conclusion In the give case, X and Y have entered into a contract for sale of car but they did
not fix the price of the car. X refused to sell the car to Y on this ground. Y can legally
demand the car from X and X can recover a reasonable price of the car from Y
Practical Question
Mr. A contracted to sell his swift car to Mr. B. Both missed to discuss the price of the said swift
car. Later, Mr. A refused to sell his swift car to Mr. B on the ground that the agreement was void
being uncertain about the price. Does Mr. B have any right against Mr. A under the Sale of Goods
Act, 1930? [June 2023 (4 Marks)] (RTP June 2024)
Law As per the provisions of Section 2(10) is to be read with Section 9 of the Sale of
Goods Act, 1930. Payment of the price by the buyer is an important ingredient of a
contract of sale. If the parties totally ignore the question of price while making the
contract, it would not become an uncertain and invalid agreement. It will rather be
a valid contract and the buyer shall pay a reasonable price
Conclusion In the given case, Mr. A and Mr. B have entered into a contract for sale of a motor
car, but they did not fix the price of the same. Mr. A refused to sell the car to Mr. B
on this ground. Mr. B can legally demand the car from Mr. A and Mr. A can recover
a reasonable price of the car from Mr. B.
Practical Question
Kapil entered in a contract with Rahul to purchase 1000 litres of mustard oil at the price which
should be fixed by Akhilesh. Rahul already delivered 600 litres out of 1000 litres to Kapil but when
remaining 400 litres was ready to deliver, Akhilesh denied fixing the price of mustard oil. Rahul
asked Kapil to return the oil already delivered and avoid the delivery of 400 litres. Kapil sued Rahul
for non-delivery of remaining 400 litres mustard oil. Advise in the light of the Sale of Goods Act,
1930. (MTP Apr. 24) (7 Marks)
Law
Conclusion
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DOCUMENT OF TITLE TO GOODS

“Document of title to goods” includes bill of lading, dock-warrant, warehouse keeper’s certificate,
wharfingers’ certificate, railway receipt, multimodal transport document, warrant or order for the
delivery of goods and any other document used in the ordinary course of business as proof of the
possession or control of goods or is for authorizing or purporting to authorize, either by endorsement
or by delivery, the possessor of the document to transfer or receive goods thereby represented.
[Section 2(4)]
Bill of lading, dock warrant, warehouse keeper’s certificate, wharfinger’s certificate,
railway receipt, warrant, an order of delivery of goods.
The list is only illustrative and not exhaustive. Any other document which has the above characteristics
also will fall under the same category. Though a bill of lading is a document of title, a mate’s receipt
is not; it is regarded at law as merely an acknowledgement for the receipt of goods. A document
amounts to a document of title only where it shows an unconditional undertaking to deliver the goods
to the holder of the document.
However, there is a difference between a ‘document showing title’ and ‘document of title’. A
share certificate is a ‘document’ showing title but not a document of title. It merely shows that the
person named in the share certificate is entitled to the share represented by it, but it does not allow
that person to transfer the share mentioned therein by mere endorsement on the back of the certificate
and the delivery of the certificate.
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Unit 2
2 CONDITIONS AND
WARRANTIES
Sec.12 of the Sale of Goods Act states that a stipulation (or term) in a contract of sale with reference
to goods may be a condition or a warranty.
Stipulation
Conditions Warranties
Essential to the main Collateral to main purpose of
purpose of the contract the contract
Condition
(i) The term ‘condition’ may be defined as a representation made by the seller which is so important
that its non-fulfilment defeats the very purpose of the buyer.
(ii) A condition is a stipulation essential to the main purpose of the contract, the breach of which
gives rise to a right to treat the contract as repudiated. Sec. 12(2).
(iii) Thus, a condition is an important representation by the seller which is essential to the main
purpose of the contract. And if it proves to be false, the buyer has the right to terminate the
contract and to have the refund of the price.
(iv) CONDITIONS CAN BE EXPRESSED OR IMPLIED
1. A consulted B, a car dealer, and told him that he wanted to purchase a car ‘suitable for
touring purpose’. B, suggested that a ‘Bugatti’ car would be fit for the purpose. Relying
upon this statement, A bought a ‘Bugatti’ car. Later on, the car turned out to be unfit for
the touring purpose. A wanted to reject the car and demanded the refund of the price. It
was held that A was entitled to reject the car and to have the refund of the price. In this
case, the suitability of the car, for touring purpose, was a condition of the contract. It
was so important that its non-fulfillment defeated the very purpose for which A bought
the car. [Baldrey v Marshall (1925) 1 KB 260]
2. A wants to buy a car which can give a mileage of 20 kms/liter. B, the car dealer, points
out at a particular car and says “this car will suit you”. A buys the car. But later on he
finds that the car is giving a mileage of only 10 kms/litre. THERE IS A BREACH OF
CONDITION, because the stipulation made by B forms the very basis of the contract.
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Practical Question
X consults V, a motor-car dealer for a car suitable for touring purposes to promote the sale of his
product. V suggests ‘Santro’ and X accordingly buys it from V. The car turns out to be unfit for
touring purposes. What remedy X is having now under the Sale of Goods Act, 1930? (ICAI
MODULE)
Law A stipulation in a contract of sale with reference to goods which are the subject
thereof may be a condition or a warranty. [Sub-section (1)]
“A condition is a stipulation essential to the main purpose of the contract, the breach
of which gives rise to a right to treat the contract as repudiated”. [Sub-section (2)]
Conclusion In the instant case, the term that the ‘car should be suitable for touring purposes’ is
a condition of the contract. It is so vital that its non-fulfilment defeats the very
purpose for which X purchases the car.
X is therefore entitled to reject the car and have refund of the price.
Implied Conditions: (T/Q, A+)

1. Implied condition as to title (Sec. 14) :
Condition implied is that the seller has the right to sell the goods (means he should be the real
owner) at the time when the property is to pass.
If the seller’s title/ownership turns out to be defective, the buyer must return the goods to the true
owner and recover the price from the seller
A sells to B tins of condensed milk labeled “Nissly Brand” and this is proved to be an
infringement of Nestle Company’s trade mark. Is it a breach of implied condition as to title?
(Ans: When a person sell the goods by infringing a copyrights or trademark of the others,
he is considered as not having right to sell such goods.)
A purchased a tractor from B who had no title to it. After 2 months, the true owner spotted
the tractor and demanded it from A. Held that A was bound to hand over the tractor to its
true owner and that A could sue B, the seller without title, for the recovery of the purchase
price.
2. Implied condition in a sale by description (Sec. 15) :

 Where there is a contract for the sale of goods by description, there is an implied condition
that the goods shall correspond with the description. “Correspond with the description” means
that the buyer must get the goods that he has asked for. The description may be given –
(a) By mentioning qualities or characteristic of the goods e.g. Basmati rice.
(b) By mentioning the trademark or brand name e.g. Videocon TV.
(c) By the type of packing e.g. 1 kg. packing of tea in plastic jar.
 If the buyer does not get the goods he has described he can reject the goods.
 The rule is “If you contract to sell peas, you cannot oblige a party to take beans.
A at Kolkata sells to B twelve bags of “waste silk” on its way from Murshidabad to Kolkata.
There is an implied condition that the silk shall be such as is known in the market as “Waste
Silk”. If it not, B is entitled to reject the goods.
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A ship was contracted to be sold as “copper-fastened vessel” but actually it was only partly
copper-fastened. Held that goods did not correspond to description and hence could be
returned or if buyer took the goods, he could claim damages for breach.
3. Implied condition as to sample

In a contract of sale by sample, there is an implied condition that
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with the sample,
In a case of sale by sample of two parcels of wheat, the seller allowed the buyer an
inspection of the smaller parcel but not of the larger parcel. In this case, it was held that the
buyer was entitled to refuse to take the parcels of wheat
(c) the goods shall be free from any defect rendering them un-merchantable, which would not be
apparent on reasonable examination of the sample. This condition is applicable only with
regard to defects, which could not be discovered by an ordinary examination of the goods. If
the defects are latent, then the buyer can avoid the contract. This simply means that the goods
shall be free from any latent defect i.e. a hidden defect.
A company sold certain shoes made of special sole by sample for the French Army. The
shoes were found to contain paper not discoverable by ordinary inspection. Held, the buyer
was entitled to the refund of the price plus damages
What are the implied conditions in a contract of 'Sale by sample' under the Sale of Goods
Act, 1930? Also state the implied warranties operative under the Act? [May 2022 (6
Marks)] [RTP Dec 2023]
4. Implied condition in a sale by sample as well as by description: (Sec. 15)

When goods are sold by sample as well as by description, the goods shall correspond both with
the sample and with the description.
A agreed with B to sell certain oil described as refined sunflower oil, warranted only equal
to sample. The goods tendered were equal to sample, but contained a mixture of hemp oil.
B can reject the goods
5. Implied condition as to fitness or quality: Sec. 16(1)
The general rule is, there is no implied condition as to quality or fitness for the purpose of
the buyer. This is based on the doctrine of “caveat emptor” that is, the goods he is buying would
suit his purpose or not.
(For details refer Doctrine of Caveat Emptor)
6. Implied condition as to merchantability:

 Sec. 16(2) where goods are brought by description from a seller who deals in goods of that
description, there is an implied condition that goods shall be of merchantable quality.
 Merchantable means that the goods are commercially saleable and that they are fit for
the purpose for which they are generally used.
 Where the buyer examines the goods prior to sale, there is no implied condition as to
merchantability as regards defects which such examination ought to have revealed.
 However, inspite of examination, if the goods have certain latent defects which no
examination could reveal, the implied condition remains.
X bought a colour TV from M/s Concord Electronics. The TV was defective right from the
beginning and it did not work inspire of repairs by expert technicians. There is a breach of
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implied condition as to merchantability and the dealer will have to take back the defective
TV and refund the amount.
- X orders motor horns from a manufacturer. The horns supplied are defective. X is
entitled to reject them as unmerchantable
7. Implied condition as to wholesomeness.

 In case of food stuff and eatables, in addition to the implied condition as to merchantability,
there is another implied condition that the goods shall be wholesome that is fit for human
consumption.
X bought milk from Y, a dairy owner. The milk was contaminated with germs of typhoid
fever. X’s wife on taking the milk, became infected and died of it. Y was held liable in
damages
Practical Question
Mrs. Geeta went to the local rice and wheat wholesale shop and asked for 100 kgs of Basmati rice.
The Shopkeeper quoted the price of the same as ` 125 per kg to which she agreed. Mrs. Geeta
insisted that she would like to see the sample of what will be provided to her by the shopkeeper
before she agreed upon such purchase. The shopkeeper showed her a bowl of rice as sample.
The sample exactly corresponded to the entire lot.
The buyer examined the sample casually without noticing the fact that even though the sample was
that of Basmati Rice but it contained a mix of long and short grains. The cook on opening the bags
complained that the dish if prepared with the rice would not taste the same as the quality of rice
was not as per requirement of the dish. Now Mrs. Geeta wants to file a suit of fraud against the
seller alleging him of selling mix of good and cheap quality rice. Will she be successful?
Decide the fate of the case and options open to the buyer for grievance redressal as per the
provisions of Sale of Goods Act, 1930?
What would be your answer in case Mrs. Geeta specified her exact requirement as to length of
rice? (ICAI MODULE) [RTP Dec 2023]
Law As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods
Act, 1930, in a contract of sale by sample, there is an implied condition that:
a) the bulk shall correspond with the sample in quality;
b) the buyer shall have a reasonable opportunity of comparing the bulk with the
sample
Conclusion (i) In the instant case, in the light of the provisions of Sub-Clause (b) of Sub-Section
(2) of Section 17 of the Act, Mrs. Geeta will not be successful as she casually
examined the sample of rice (which exactly corresponded to the entire lot)
without noticing the fact that even though the sample was that of Basmati Rice
but it contained a mix of long and short grains.
(ii) In the instant case, the buyer does not have any option available to her for
grievance redressal.
(iii) In case Mrs. Geeta specified her exact requirement as to length of rice, then
there is an implied condition that the goods shall correspond with the
description. If it is not so, then the seller will be held liable.
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Practical Question
Certain goods were sold by sample by A to B, who in turn sold the same goods by sample to C and
C by sample sold the goods to D. The goods were not according to the sample. Therefore, D who
found the deviation of the goods from the sample rejected the goods and gave a notice to C. C
sued B and B sued A. Advise B and C under the Sale of Goods Act, 1930. (ICAI MODULE) [June
2023 (4 Marks)] .[RTP May 2022]
Law As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods Act,
1930, in a contract of sale by sample, there is an implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with
the sample
Conclusion In the instant case, D who noticed the deviation of goods from the sample can reject
the goods and treat it as a breach of implied condition as to sample which provides
that when the goods are sold by sample the goods must correspond to the sample
in quality and the buyer should be given reasonable time and opportunity of
comparing the bulk with the sample. Whereas C can recover only damages from B
and B can recover damages from A. For C and B it will not be treated as a breach
of implied condition as to sample as they have accepted and sold the goods
according to Section 13(2) of the Sales of Goods Act, 1930. Hence, they cannot
reject the goods, but claim the damages
Practical Question
A person purchased bread from a baker’s shop. The piece of bread contained a stone in it which
broke buyer’s tooth while eating. What are the rights available to the buyer against the seller under
the Sale of Goods Act, 1930? (ICAI MODULE) [RTP Nov 2022]
Law This is a case related to implied condition as to wholesomeness which provides that
the eatables and provisions must be wholesome that is they must be fit for human
consumption
Conclusion In this case, the piece of bread contained a stone which broke buyer’s tooth while
eating, thereby considered unfit for consumption. Hence, the buyer can treat it as
breach of implied condition as to wholesomeness and can also claim damages from
the seller.
Practical Question
Q asked P, the seller for washing machine which is suitable for washing woollen clothes. Mr. P
showed him a particular machine which Mr. Q liked and paid for it. Later on, machine delivered and
was found unfit for washing woollen clothes. He immediately informed Mr. P about the delivery of
wrong machine. Mr. P refused to exchange the same, saying that the contract was complete after
the delivery of washing machine and payment of price. With reference to the provisions of Sale of
Goods Act,1930 discuss whether Mr. P is right in refusing to exchange the washing machine? (ICAI
MODULE) (7 Marks) (MTP July 24)
Law According to Section 15 of the Sale of Goods Act, 1930, whenever the goods are
sold as per sample as well as by description, the implied condition is that the goods
must correspond to both sample as well as description. Further under Sale of Goods
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Act, 1930 when the buyer makes known to the seller the particular purpose for which
the goods are required and he relies on his judgment and skill of the seller, it is the
duty of the seller to supply such goods which are fit for that purpose
Conclusion Mr. Q has informed to Mr. P that he wanted the washing machine for washing
woollen clothes. However, the machine which was delivered by Mr. P was unfit for
the purpose for which Mr. Q wanted the machine. Therefore, Mr. Q can either
repudiate the contract or claim the refund of the price paid by him.
Practical Question
Priyansh orders an iron window to an Iron Merchant for his new house. Iron merchant sends his
technician to take the size of windows. The technician comes at the site and takes size of area
where window to be fitted. Afterwards, Iron merchant on discussion with his technician intimates
Priyansh that cost of the window will be ₹ 5,000 and he will take ₹ 1,000 as advance. Priyansh
gives ₹ 1,000 as advance and rest after fitting of window. After three days when technician try to fit
the window made by him at the site of Priyansh, it was noticed that the size of window was not
proper. Priyansh requests the Iron merchant either to remove the defect or return his advance. Iron
merchant replies that the window was specifically made for his site and the defect cannot be
removed nor can it be of other use. So, he will not refund the advance money rather Priyansh
should give him the balance of ₹ 4,000. State with reason under the provisions of the Sale of Goods
Act, 1930, whether Priyansh can take his advance back? [RTP June 2023]
Law By virtue of provisions of Section 16 of the Sale of Goods Act, 1930, there is an
implied condition that the goods should be in merchantable position at the time of
transfer of property. Sometimes, the purpose for which the goods are required may
be ascertained from the facts and conduct of the parties to the sale, or from the
nature of description of the article purchased. In such a case, the buyer need not
tell the seller the purpose for which he buys the goods.
Conclusion On the basis of above provisions and facts given in the question, it is clear that as
window size was not proper, window was not in merchantable condition. Hence, the
implied condition as to merchantability was not fulfilled and Priyansh has the right
to avoid the contract and recover his advance money back
Practical Question
A purchased a hot-water bottle from a retail chemist. The chemist informed him that the
bottle was specially meant for holding hot water. At the time of use, the bottle burst as soon
as the hot water was poured into it and injured A’s wife. Comment on remedies available to
A under the Sale of Goods Act, 1930
Law Breach of implied condition as to merchantability
Conclusion A can claim damages
Practical Question
D bought a Colour TV from M/s. Kaka Enterprises for a sum of Rs 40,000. The TV set was
defective right from the beginning and it did not work inspite of repairs by the expert
mechanics. What is the remedy available to D?
Law Breach of condition as to merchantability
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Conclusion D shall be entitled to return the TV and claim damages
Warranty
(i) The term ‘warranty’ may be defined as a representation made by the seller which is not of that
importance as a condition.
(ii) “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 a right to reject the goods and treat the contract as
repudiated”.
(iii) If it proves to be untrue, the buyer cannot put an end to the contract. He can only claim damages
from the seller.
Implied warranties
In the absence of an agreement to the contrary, the following warranties are implied in every contract
of sale:
(i) The buyer must get quiet possession [Sec. 14 (b)]:
An implied warranty that the buyer shall have and enjoy quiet possession of the goods. That is to
say, if the buyer having got possession of the goods, is later on disturbed in his possession, he is
entitled to sue the seller for the breach of the warranty.
X buys a laptop from Y. After the purchase, X spends some money on its repair and uses
it for some time. Unknown to the parties, it turns out that the laptop was stolen and was
taken from X and delivered to its rightful owner. Y shall be held responsible for a breach
and X is entitled to damages of not only the price but also the cost of repairs.
(ii) The goods must be free from encumbrance [Sec.14(c)]:
An implied warranty that the goods shall be free from any charge or encumbrance in favour of any
third party not declared or known to the buyer before or at the time the contract is entered into.
A pledges his car with C for a loan of `15,000 and promises him to give its possession the
next day. A, then sells the car immediately to B, who purchased it on good faith, without
knowing the fact. B, may either ask A to clear the loan or himself may pay the money and
then, file a suit against A for recovery of the money with interest.
(iii) Warranty for quality or use by usage of trade [Sec.16(3)]:

A warranty as to fitness for a particular purpose may be annexed to a contract of sale by a custom
or usage of trade.
(iv) Disclosure of dangerous nature of goods:

Where the goods are dangerous in nature and the buyer is ignorant of the danger, the seller must
warn the buyer of the probable danger. If there is a breach of this warranty, the seller may be
liable in damages.
Exclusion of implied terms. Sec. 62: These implied conditions and warranties may be
excluded or modified by the parties to the contract by express contract, by course of
dealing and by usage of trade.
Discuss the various types of implied warranties as per the Sale of Goods Act, 1930.[Dec
2023(4 Marks)]
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Write the exceptions to the doctrine of Caveat Emptor as per the Sale of Goods Act, 1930.
(MTP May 24) (7 Marks)
When a condition can be treated as a warranty Sec. 13

In the following three cases, a breach of a condition is treated as a breach of a warrant
(i) Where the buyer altogether waives the performance of the condition. A party may for his own
benefit, waive a stipulation. It should be a voluntary waiver by buyer.
(ii) Where the buyer elects to treat the breach of the conditions, as one of a warranty. That is
to say, he may claim only damages instead of repudiating the contract. Here, the buyer has not
waived the condition but decided to treat it as a warranty.
A agrees to supply B 10 bags of first quality sugar @ ` 625 per bag but supplies only
second quality sugar, the price of which is ` 600 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 @ ` 25 per bag
(iii) Where the contract is non-severable and the buyer has accepted either the whole goods or
any part thereof. Acceptance means acceptance as envisaged in Section 72 of the Indian
Contract Act, 1872.
(iv) Where the fulfilment of any condition or warranty is excused by law by reason of impossibility
or otherwise
THE DOCTRINE OF CAVEAT EMPTOR

 Means “let the buyers beware”. i.e. a buyer must buy goods after satisfying himself of their quality
and fitness. If he makes a bad choice he cannot blame the seller or recover damages from him…
 there is no implied condition as to quality or fitness for any particular purpose
 It is buyer’s duty to examine goods thoroughly.
 The buyer should ensure at the time of purchase that the goods conform to his requirements.
 If the goods turn out to be defective, buyer cannot hold the seller responsible.
A purchases a horse from B. A needed the horse for riding but he did not mention this fact
to B. The horse is not suitable for riding but is suitable only for being driven in the carriage.
Caveat emptor rule applies here and so A can neither reject the horse nor can claim
compensation from B
EXCEPTIONS: (A+)
The doctrine of caveat emptor does not apply in the following situations:
1. Basic Exception / Fitness as to quality or use
(a) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are required,
(b) So as to show that the buyer relies on the seller’s skill, or judgment, and
(c) The goods are of a description which it is in the course of the seller’s business to supply
(whether he is the manufacturer or not, there is an implied condition that the goods shall be
reasonably fit for such purpose
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An order was placed for some trucks to be used for heavy traffic in a hilly country. The
trucks supplied by the seller were unfit for this purpose and broke down. There is a breach
of condition as to fitness.
Priest P, a draper, purchased a hot water bottle from a retail chemist, P asked the chemist if it
vs. would stand boiling water. The Chemist told him that the bottle was meant to hold hot
Last water. The bottle burst when hot water was poured into it and injured his wife. It was held
that the chemist shall be liable to pay damages to P, as he knew that the bottle was
purchased for the purpose of being used as a hot water bottle
2. Seller actively conceals a defect or is guilty of fraud: Where the seller sells the goods by
making some misrepresentation or fraud and the buyer relies on it or when the seller actively
conceals some defect in the goods so that the same could not be discovered by the buyer on a
reasonable examination, then the rule of Caveat Emptor will not apply. In such a case the buyer
has a right to avoid the contract and claim damages.
3. Goods purchased under patent or brand name: In case where the goods are purchased under
its patent name or brand name, there is no implied condition that the goods shall be fit for any
particular purpose [Section 16(1)].Here, the buyer is relying on the particular brand name.
4. Goods sold by description: Where the goods are sold by description there is an implied
condition that the goods shall correspond with the description [Section 15]. If it is not so then seller
is responsible.
5. Goods of Merchantable Quality: Where the goods are bought by description from a seller who
deals in goods of that description there is an implied condition that the goods shall be of
merchantable quality. The rule of Caveat Emptor is not applicable. But where the buyer has
examined the goods this rule shall apply if the defects were such which ought to have not been
revealed by ordinary examination [Section 16(2)].
6. Sale by sample: Where the goods are bought by sample, this rule of Caveat Emptor does not
apply if the bulk does not correspond with the sample [Section 17].
7. Goods by sample as well as description: Where the goods are bought by sample as well as
description, the rule of Caveat Emptor is not applicable in case the goods do not correspond with
both the sample and description or either of the condition [Section 15].
8. Trade Usage: An implied warranty or condition as to quality or fitness for a particular purpose
may be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat
Emptor is not applicable [Section 16(3)].
In readymade garment business, there is an implied condition by usage of trade that the
garments shall be reasonably fit on the buyer.
Write any four exceptions to the doctrine of Caveat Emptor as per the Sale of Goods Act,
1930.[MTP Jun 2022(4 Marks)]
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Practical Question
AB Cloth House, a firm dealing with the wholesale and retail buying and selling of various kinds of
clothes, customized as per the requirement of the customers. They dealt with Silk, Organdie,
cotton, khadi, chiffon and many other different varieties of cloth. Mrs.Reema, a customer, came to
the shop and asked for a specific type of cloth suitable for making a suit for her daughter’s birthday.
She specifically mentioned that she required cotton silk cloth which is best suited for the purpose.
The Shop owner agreed and arranged the cloth pieces cut into as per the buyers’ requirements.
When Reema went to the tailor to get the suit stitched, she found that seller has supplied her cotton
organdie material, cloth was not suitable for the said purpose. It was heavily starched and not
suitable for making the suit that Reema desired for. The Tailor asked Reema to return the cotton
organdie cloth as it would not meet his requirements.
The Shop owner refused to return the cloth on the plea that it was cut to specific requirements of
Mrs. Reema and hence could not be resold.
With reference to the doctrine of "Caveat Emptor' explain the duty of the buyer as well as the seller.
Also explain whether Mrs. Reema would be able to get the money back or the right kind of cloth as
per the requirement? (RTP Sep 24)
Law 1) Duty of the buyer according to the doctrine of “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 the buyers to make a
proper selection or choice of the goods. If the goods turn out to be defective, he
cannot hold the seller liable. The seller is in no way responsible for the bad
selection of the buyer. The seller is not bound to disclose the defects in the
goods which he is selling.
2) Duty of the seller according to the doctrine of “Caveat Emptor”: The
following exceptions to the Caveat Emptor are the duties of the seller:
i. Fitness as to quality or use
ii. Goods purchased under patent or brand name
iii. Goods sold by description
iv. Goods of Merchantable Quality
v. Sale by sample
vi. Goods by sample as well as description
vii. Trade usage
viii. Seller actively conceals a defect or is guilty of fraud
Conclusion Based on the above provision and facts given in the question, it can be concluded
that Mrs. Reema is entitled to get the money back or the right kind of cloth as
required to serve her purpose. It is the duty of the seller to supply such goods as
are reasonably fit for the purpose mentioned by the buyer. [Section 16(1) of the
Sale of Goods Act, 1930]
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Practical Question
M/s Woodworth & Associates, a firm dealing with the wholesale and retail buying and
selling of various kinds of wooden logs, customized as per the requirement of the
customers. They dealt with Rose wood, Mango wood, Teak wood, Burma wood etc.
Mr. Das, a customer came to the shop and asked for wooden logs measuring 4 inches broad
and 8 feet long as required by the carpenter. Mr. Das specifically mentioned that he
required the wood which would be best suited for the purpose of making wooden
doors and window frames. The Shop owner agreed and arranged the wooden pieces cut into
as per the buyers requirements.
The carpenter visited Mr. Das's house next day, and he found that the seller has supplied
Mango Tree wood which would most unsuitable for the purpose. The: carpenter
asked Mr. Das to return the wooden logs as it would not meet his requirements.
The Shop owner refused to return the wooden logs on the plea that logs were cut to
specific requirements of Mr. Das and hence could not be resold.
(i) Explain the duty of the buyer as well as the seller according to the doctrine of
“Caveat Emptor”.
(ii) Whether Mr. Das would be able to get the money back or the right kind of wood as
required serving his purpose? (6 Marks) (ICAI module)
Law Duty of the buyer according to the doctrine of “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 the buyers to make a
proper selection or choice of the goods. If the goods turn out to be defective he
cannot hold the seller liable. The seller is in no way responsible for the bad
selection of the buyer. The seller is not bound to disclose the defects in the
goods which he is selling.
Duty of the seller according to the doctrine of “Caveat Emptor”: The following
exceptions to the Caveat Emptor are the duties of the seller:
(i) Fitness as to quality or use
(ii) Goods purchased under patent or brand name
(iii) Goods sold by description
(iv) Goods of Merchantable Quality
(v) Sale by sample
(vi) Goods by sample as well as description
(vii) Trade usage
(viii) Seller actively conceals a defect or is guilty of fraud
Conclusion As Mr. Das has specifically mentioned that he required the wood which
would be best suited for the purpose of making wooden doors and window
frames but the seller supplied Mango tree wood which is most unsuitable
for the purpose. Mr. Das is entitled to get the money back or the right kind of
wood as required serving his purpose. It is the duty of the seller to supply such
goods as are reasonably fit for the purpose mentioned by buyer. [Section 16(1)
of the Sale of Goods Act, 1930]
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Practical Question
For the purpose of making uniform for the employees, Bansi Bhaiya bought dark blue
colored cloth form Vivek, but did not disclose to the Seller the purpose of said purchase.
When uniform were prepared and used by the employees, the cloth was found unfit.
However, there was evidence that the cloth was fit for caps, boots and carriage lining.
Advice Bansi Bhaiya whether he is entitled to have any remedy?
Ref. Case Jones V. Pandgett
Law Hint: explain the Doctrine of Caveat Emptor
Conclusion After applying above law to present situation, we conclude that, the seller is bound
only to disclose any special matter related to goods, the cloth dealt by Vivek has
multiple uses and he not bound to disclose them, if Bansi bhaiya required special
quality cloth he must have enquired about it, but he did not do so. Hence, the Buyer
will not succeed in getting any remedy from the Seller under the Sale of Goods Act.
Practical Question
A lady buys synthetic pearls for a high price thinking that they are natural pearls. The seller
does not correct her mistake. Does she has any remedies against the seller? Would your
decision be different if the lady had told the seller: “I think they are natural pearls and,
therefore, agree to buy them at your price,” and the seller was silent?
Law As per the Doctrine of Caveat Emptor a buyer must buy goods after satisfying
himself of their quality and fitness. If he makes a bad choice he cannot blame
the seller or recover damages from him.
But the above rule has certain exceptions, sec. 16(1) says that Where the
buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are required so as to show that the buyer relies on
the seller’s skill, or judgment and Where the seller actively conceals defect in
the goods so that the same could not be discovered on a reasonable
examination.
Conclusion After applying above law to present situation, we conclude that, in the first case
the lady won’t have any remedy against the seller, but the latter case differs as
the lady enquired about the same and silence of the seller amounted to his
acceptance, thus the seller shall be liable for the same.
Practical Question
Mrs. G bought a tweed coat from P. When she used the coat she got rashes on her skin as her
skin was abnormally sensitive. But she did not make this fact known to the seller i.e. P. Mrs. G filled
a case against the seller to recover damages. Can she recover damages under the Sale of Goods
Act, 1930? (ICAI MODULE)
Law According to Section 16(1) of Sales of Goods Act, 1930, normally in a contract of
sale there is no implied condition or warranty as to quality or fitness for any particular
purpose of goods supplied. The general rule is that of “Caveat Emptor” that is “let
the buyer beware”. But where the buyer expressly or impliedly makes known to the
seller the particular purpose for which the goods are required and also relies on the
seller’s skill and judgement and that this is the business of the seller to sell such
goods in the ordinary course of his business, the buyer can make the seller
responsible
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Conclusion In the given case, Mrs. G purchased the tweed coat without informing the seller i.e.
P about the sensitive nature of her skin. Therefore, she cannot make the seller
responsible on the ground that the tweed coat was not suitable for her skin. Mrs. G
cannot treat it as a breach of implied condition as to fitness and quality and has no
right to recover damages from the seller.
CASE LAWS
Sr. Name of the
Explanation
No. Case Law
1. W bought a reaping machine which he had never seen and which, V, the
seller, described “to have been new the previous year and used to cut
Varley vs Whipp
only 50 or 60 acres”. W found the machine to be extremely old. Held, W
could return the machine as it did not correspond with the description.
2. G purchased a tweed coat which caused her dermatitis (inflammation of Griffiths vs
the skin) due to her unusually sensitive skin. Held, the seller was not Peter Conway
liable, the cloth being fit for any one with a normal skin. Ltd.
3. M sold to L 30 tins of Australian fruits packed in case each containing 30

fruits. M tendered a substantial portion in case containing 24 fruits. Held,
Moore & Co. v.
L could reject all the tins as the goods were not packed according to the
Landauer
description given in the contract as the method in which the fruit was
packed was an essential part of the description.
4. N agreed to sell oil described as “Foreign refined Rape Oil, warranted
only equal to sample”. The Goods tendered were equal to sample, but
Nichol v. Godts
contained an admixture of Hemp Oil. Held, the Buyer could reject the
Goods.
5. A purchased a hot water bottle from a chemist. The bottle burst and
injured his wife. Held breach of condition as to fitness and thus chemist Priest vs Last
was liable for refund of price plus damages.
6. P sold a plastic catapult to G, a boy of six. While G was using it in the

proper manner, the catapult broker due to the fact that the material used
in its manufacture was unsuitable. As a result, the boy was blinded in Godley vs Perry
one eye. Held, P was liable as the catapult was not of merchantable
quality.
Basis (A+) Condition Warranty

1. Definition A Condition is a stipulation which is A Warranty is a stipulation which is only
essential to the main purpose of collateral or subsidiary to the main
the contract. [Sec. 12(2)] purpose of the contract. [Sec. 12(3)]
2. Effect of Breach of Condition gives the Breach of warranty gives only the right
breach aggrieved party to sue for damages. The contract
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(i) a right to repudiate the contract cannot be repudiated and the Goods
and (ii) right to sue for damages. cannot be rejected.
3. Extent / Depth Condition goes directly to the root Warranty does not go directly to the root
of the contract. / base of the contract.
4. Inter— Breach of Condition may be Breach of Warranty cannot be treated
changeability treated as a breach of Warranty in as a breach of Condition.
certain situations.
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Unit 3
3 TRANSFER OF
OWNERSHIP FROM
SELLER TO BUYER
TRANSFER OF PROPERTY AND RISK IN GOODS (C)
Transfer of Property in Goods
Principle: The main object of contract of Sale is, Transfer of property in goods from the seller
to the buyer. Transfer of Property means transfer of ownership of goods and not mere possession
of goods. Once the ownership in goods is transferred, risk in the goods sold is also transferred.
Transfer of Property Transfer of Transfer of Risk in

in Goods Ownership in Goods Goods
What are the rules regarding Transfer of Property? (A+, T/Q | P/Q)
[A] Unascertained Goods: [Sec. 18 & 23]:
No property in goods is transferred from the Seller to the Buyer unless and until the Goods are
ascertained and appropriated.
1. Ascertainment (Sec 18): It is the process of identifying the Goods and setting apart as per
the intended quality or description.
2. Appropriation: For property to pass u/s 23, the following conditions must be satisfied —
a. There is a contract for the sale of unascertained or future goods.
b. The goods should conform to the description and quality stated in the contract.
c. The goods must be in a deliverable state.
d. The goods must be unconditionally (as distinguished from an intention to
appropriate) appropriated to the contract either by delivery to the buyer or his
agent or the carrier.
e. The appropriation must be made by: (i) the seller with the assent of the buyer; or
(ii) the buyer with the assent of the seller.
A having a quantity of sugar in bulk, more than sufficient to fill 20 bags, contracts to sell to
B 20 bags of it. After the contract A fills 20 bags with the sugar, gives notice to B that the
bags are ready and requires him to take them away, B says he will take them as soon as
he can. By this appropriation by A, and assent by B, property, in the sugar passes to B.
Delivery of the goods to the carrier [Section 23(2)]: 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
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reserve the right of disposal, he is deemed to have unconditionally appropriated the goods
to the contract
State the various essential elements involved in the sale of unascertained goods and its
appropriation as per the Sale of Goods Act, 1930. (MTP Apr. 24) (7 Marks)
Practical Question
Mr. S agreed to purchase 100 bales of cotton from V, out of his large stock and sent his men to
take delivery of the goods. They could pack only 60 bales. Later on, there was an accidental fire
and the entire stock was destroyed including 60 bales that were already packed. Referring to the
provisions of the Sale of Goods Act, 1930 explain as to who will bear the loss and to what extent?
(ICAI MODULE)
Law Section 26 of the Sale of Goods Act, 1930 provides that unless otherwise agreed,
the goods remain at the seller’s risk until the property therein is transferred to the
buyer, but when the property therein is transferred to the buyer, the goods are at
buyer’s risk whether delivery has been made or not. Further Section 18 read with
Section 23 of the Act provide that in 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. Also where there is contract for the sale of unascertained or future
goods by description, the property in the goods thereupon passes to the buyer.
when goods of that description are put in a deliverable state and are unconditionally
appropriated to the contract, either by the seller with the assent of the buyer or by
the buyer with the assent of the seller, Such assent may be express or implied
Conclusion Applying the aforesaid law to the facts of the case in hand, it is clear that Mr. S has
the right to select the goods out of the bulk and he has sent his men for the same
purpose.
Hence the problem can be answered based on the following two assumptions and
the answer will vary accordingly.
i. Where the bales have been selected with the consent of the buyer’s
representatives: In this case, the property in the 60 bales has been
transferred to the buyer and goods have been appropriated to the
contract. Thus, loss arising due to fire in case of 60 bales would be borne
by Mr. S. As regards 40 bales, the loss would be borne by Mr. V, since
the goods have not been identified and appropriated.
ii. Where the bales have not been selected with the consent of buyer’s
representatives:In this case, the property in the goods has not been
transferred at all and hence the loss of 100 bales would be borne by Mr. V
completely
[B] Transfer of Property in Ascertained / Specific Goods [T/Q | PQ] (A):

1. Specific Goods in a deliverable State [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, and it is immaterial
whether the time of payment of the price or the time of delivery of the goods, or both, is postponed.
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X goes into a shop and buys a television and asks the shopkeeper for its home delivery.
The shopkeeper agrees to do it. The television immediately becomes the property of X.
2. Specific Goods in deliverable state, but price not ascertained [Sec. 22]:
(a) The Goods are specified, but the Seller has to weigh, measure, test or do some other act
or thing with reference to the Goods for the purpose of ascertaining the price.
(b) Property passes only after the Seller has weighed, measured, tested or does some other
action or thing to ascertain the price and the Buyer has notice thereof.
A sold carpets to the Company which were required to be laid. The carpet was delivered
to the company’s premises but was stolen before it could be laid. It was held that the
carpet was not in deliverable state as it was not laid, which was part of the contract and
hence, the property had not passed to the buyer company
3. Specific Goods not in a deliverable state [Sec.21]:

(a) The Goods are specified, but the Seller has to do some act or process so as to put the
Goods in a deliverable state.
(b) Property passes only when the Seller has done such action and puts the goods into
a deliverable state and the Buyer has notice thereof.
Peter buys a laptop from an electronics store and asks for a home delivery. The
shopkeeper agrees to it. However, the laptop does not have a Windows operating system
installed. The shopkeeper promises to install it and call Peter before making the delivery.
In this case, the property transfers to Peter only after the shopkeeper has installed the
OS making the laptop ready for delivery, and intimated the buyer about it
A, a boat-builder, contracts to sell to B, for a stated price, a boat which lies in A’s yard. The
boat needs to be painted and fitted for plying in the turbulent river, and the parties have
agreed that price shall be paid on delivery. Property in the boat and risk do not pass to B
until boat has been painted and fitted and notice thereof is given to B.
[C] Goods sent on Approval or on Sale or Return basis [Sec. 24]:

When goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the
property therein passes to the buyer-
(a) when he signifies his approval or acceptance to the seller or does any other act adopting
the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the goods without
giving notice of rejection, then, if a time has been fixed for the return of the goods, on the
expiration of such time, and, if no time has been fixed, on the expiration of a
reasonable time; or
(c) he does something to the good which is equivalent to accepting the goods e.g. he
pledges or sells the goods.
P brought a musical instrument from a musical shop on a condition that he will purchase it,
if he likes that instrument. After a week he has informed the shop owner that he has agreed
to purchase the musical instrument. The ownership is transferred when he has decided to
purchase the instrument as his own
‘A’ delivered some jewellery to ‘B’ on sale or return basis. ‘B’ pledged the jewellery with ‘C’.
It was held that the ownership of the jewellery had been transferred to ‘B’ as he had adopted
the transaction by pledging the jewellery with ‘C’. In this case, ‘A’ has no right against ‘C’.
He can only recover the price of the jewellery from ‘B’.
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A sends to B a water motor on approval or return in March, 2020. B to return it after trial in
August, 2020. The water motor has not been returned within a reasonable time, and
therefore, A is not bound to accept it and B must pay the price
Practical Question
Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return basis. After a
week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now claims back the motor car
from Mr. Ganesh. Will she succeed? Referring to the provisions of the Sale of Goods Act, 1930,
decide and examine what recourse is available to Ms. Preeti. (ICAI MODULE)
Law As per the provisions of section 24 of the Sale of Goods Act, 1930, when goods are
delivered to the buyer on approval or “on sale or return" or other similar terms, the
property therein passes to the buyer
a) when the buyer signifies his approval or acceptance to the seller or does any
other act adopting the transaction;
b) if he does not signify his approval or acceptance to the seller but retains the
goods without giving notice of rejection, then, if a time has been fixed for the
return of the goods, on the expiration of such time, and, if no time has been
fixed, on the expiration of a reasonable time; or
c) he does something to the good which is equivalent to accepting the goods e.g.
he pledges or sells the goods
Conclusion Referring to the above provisions, we can analyse the situation given in the
question.
Since, Mr. Joshi, who had taken delivery of the Motor car on Sale or Return basis
and pledged the motor car to Mr. Ganesh, has attracted the third condition that he
has done something to the good which is equivalent to accepting the goods e.g. he
pledges or sells the goods. Therefore, the property therein (Motor car) passes to
Mr.
Joshi. Now in this situation, Ms. Preeti cannot claim back her Motor Car from Mr.
Ganesh, but she can claim the price of the motor car from Mr. Joshi only
Practical Question
The buyer took delivery of 20 tables from the seller on sale or return basis without examining them.
Subsequently, he sold 5 tables to his customers. The customer lodged a complaint of some defect
in the tables. The buyer sought to return tables to the seller. Was the buyer entitled to return the
tables to the seller under the provisions of the Sale of Goods Act, 1930? (ICAI MODULE)
Law According to Section 24 of the Sales of Goods Act, 1930, in case of delivery of goods
on approval basis, the property in goods passes from seller to the buyer:-
i. When the person to whom the goods are given either accepts them or
does an act which implies adopting the transaction.
ii. When the person to whom the goods are given retains the goods without
giving his approval or giving notice of rejection beyond the time fixed for
the return of goods and in case no time is fixed after the lapse of
reasonable time
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Conclusion In the given case, seller has delivered 20 tables to the buyer on sale or return basis.
Buyer received the tables without examining them. Out of these 20 tables, he sold
5 tables to his customer. It implies that he has accepted 5 tables out of 20.
When the buyer received the complaint of some defect in the tables, he wanted to
return all the tables to the seller. According to the provisions of law he is entitled to
return only 15 tables to the seller and not those 5 tables which he has already sold
to his customer. These 5 tables are already accepted by him so the buyer becomes
liable under the doctrine of “Caveat Emptor
Practical Question
A delivered a horse to B on sale and return basis. The agreement provided that B should try the
horse for 8 days and return, if he did not like the horse. On the third day the horse died without the
fault of B. A file a suit against B for the recovery of price. Can he recover the price? (ICAI MODULE
HINT A delivered the horse to B on sale or return basis. It was decided between them that B
will try the horse for 8 days and in case he does not like it, he will return the horse to the
owner A. But on the third day the horse died without any fault of B. The time given by the
seller A to the buyer B has not expired yet. Therefore, the ownership of the horse still
belongs to the seller A. B will be considered as the owner of the horse only when B does
not return the horse to A within stipulated time of 8 days.
The suit filed by A for the recovery of price from B is invalid and he cannot recover the
price from B. [Section 24].
Had the horse died after the expiry of given time i.e. 8 days, then B would have been held
liable (if the horse was still with him) but not before that time period
Practical Question
Samuel purchased a Television set from Arun, the owner of Gada Electronics, on the condition that
for the first three days he will check its quality and if satisfied he will pay for that otherwise he will
return the Television set. On the second day, the Television set was spoiled due to an earthquake.
Arun demands the price of Television set from Samuel. Whether Samuel is liable to pay the price
under the Sale of Goods Act, 1930? Who will ultimately bear the loss? (RTP Sep 24) (RTP June
2024) [RTP Nov 2022]
Law According to Section 24 of the Sale of Goods Act, 1930, "When the goods are
delivered to the buyer on approval or on sale or return or other similar terms, the
property passes to the buyer:
i. when he signifies his approval or acceptance to the seller,
ii. when he does any other act adopting the transaction, and
iii. if he does not signify his approval or acceptance to the seller but retains
goods beyond a reasonable time".
Further, as per Section 8, 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
Conclusion Samuel purchases a Television set from Arun, the owner of Gada Electronics, on
sale or approval for three days. Before Samuel could take any decision, the
Television set spoiled due to earthquake.According to the above provisions and
fact, the property has not been passed to Samuel i.e. buyer as no condition of
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Section 24 is satisfied. Hence, risk is not passed to the buyer and the agreement is
thereby avoided. Samuel is not liable to pay the price. The loss finally should be
borne by Seller, Mr. Arun
Seller’s reservation of the right to dispose of Goods./ Conditional

Appropriation (sec 25)
This section preserves the right of disposal of goods to secure that the price is paid before the property
in goods passes to the buyer.
Where there is contract of sale of specific goods or where the goods have been subsequently
appropriated to the contract, the seller may, by the terms of the contract or appropriation, as the case
may be, reserve the right to dispose of the goods, until certain conditions have been fulfilled. In such
a case in spite of the fact that the goods have already been delivered to the buyer or to a carrier or
other bailee for the purpose of transmitting the same to the buyer, the property therein will not pass
to the buyer till the condition imposed, if any, by the seller has been fulfilled.
Circumstances under which the right to disposal may be reserved: In the following
circumstances, seller is presumed to have reserved the right of disposal:
1 If the goods are shipped or delivered to a railway administration for carriage and by the bill of
lading or railway receipt, as the case may be, the goods are deliverable to the order of the
seller or his agent, then the seller will be prima facie deemed to have reserved to the right
of disposal.
2 Where the seller draws a bill on the buyer for the price and sends to him the bill of exchange
together with the bill of lading or (as the case may be) the railway receipt to secure acceptance
or payment thereof, the buyer must return the bill of lading, if he does not accept or pay the bill.
And if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does
not pass to him.
Law relating to passing of risk in Sale of Goods (Sec 26)

1. Seller’s risk: Unless otherwise agreed upon, Goods remain only at the Seller’s risk until the
property therein is transferred to the Buyer. Hence, risk is borne by the Buyer, only when the
property in the Goods passes over to him.
2. Risk passes with property: When the property in Goods is transferred to Buyer, Goods are at
the Buyer’s risk, irrespective of whether delivery has been made or not. [Sec. 26]
3. Exceptions: Following are the exceptions to the general rule that risk passes with property
(a) Delayed delivery: Where delivery of Goods has been delayed through the fault of either
Buyer or Seller, Goods are at the risk of the party in fault as regards any loss which might not
have occurred but for such fault.
(b) Agreement between parties: The parties may be special agreement stipulate that ‘risk’ will
pass sometime after or before passing of property.
A bids for an antique painting at a sale by auction. After the bid, when the auctioneer struck
his hammer to signify acceptance of the bid, he hit the antique which gets damaged. The
loss will have to be borne by the seller, because the ownership of goods has not yet passed
from the seller to the buyer.
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Rule:-
Nemo dat quad non-habet: (No one can give better title/ownership to the goods than what he
himself has) (A, T/Q)
Rule : Nemo dat Quad non-habet
Meaning No one can give better tittle than what he has i.e. only owner can transfer good
tittle
Exception Shortcut : A-U-E-F-G-H-I-J
A Sale by Agent can transfer good tittle to 3rd party as act of agent is
Agent act of principal. A sale made by a mercantile agent of the
goods for document of title to goods would pass a good title
to the buyer in the following circumstances; namely;
(a) If he was in possession of the goods or documents with
the consent of the owner;
(b) If the sale was made by him when acting in the ordinary
course of business as a mercantile agent; and
(c) If the buyer had acted in good faith and has at the time
of the contract of sale, no notice of the fact that the seller
had no authority to sell (Proviso to Section 27).
U Unpaid Where an unpaid seller who had exercised his right of lien or
seller stoppage in transit resells the goods, the buyer acquires a
good title to the goods as against the original buyer
E Estoppel Where the owner is estopped by the conduct from denying
the seller’s authority to sell, the transferee will get a good title
as against the true owner. But before a good title by estoppel
can be made, it must be shown that the true owner had
actively suffered or held out the other person in question as
the true owner or as a person authorized to sell the goods
FG Finder of Can resale and transfer good and tittle if condition fulfilled
goods
H Person 1. A buyer would acquire a good title to the goods sold to
holding him by a seller who had obtained possession of the goods
under under a contract voidable on the ground of coercion,
Voidable
fraud, misrepresentation or undue influence provided that
contract
the contract had not been rescinded until the time of the
sale (Section 29).
I Insolvent Sale by an Official Receiver or Liquidator of the Company will

give the purchaser a valid title
I Seller or  If a person has sold goods but continues to be in
buyer in possession of them or of the documents of title to them,
possession he may sell them to a third person, and if such person
obtains the delivery thereof in good faith and without
notice of the previous sale
 Where a buyer with the consent of the seller obtains
possession of the goods before the property in them has
passed to him, he may sell, pledge or otherwise dispose
of the goods to a third person, and if such person obtains
delivery of the goods in good faith and without notice of
the lien or other right of the original seller in respect of the
goods, he would get a good title to them
J Joint owner If one of several joint owners of goods has the sole
(sec 28) possession of goods by permission of the co-owners, the
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property in the goods is transferred to any person who buys

them from such joint owner in good faith and has not at the
time of the contract of sale notice that the seller has no
authority to sell.
“Nemo Dat Quod Non Habet” – “None can give or transfer goods what he does not himself
own.” Explain the rule and state the cases in which the rule does not apply under the
provisions of the Sale of Goods Act, 1930. (ICAI MODULE) [MTP Nov 2022(4 Marks)]
Explain any six circumstances in detail in which a non-owner can convey better title to the
bona fide purchaser of goods for value under the Sale of Goods Act, 1930.[MTP Apr 2023(6
Marks)]
Practical Question
A, B and C were joint owner of a truck and the possession of the said truck was with B. X purchased
the truck from B without knowing that A and C were also owners of the truck. Decide in the light of
provisions of Sales of Goods Act 1930, whether the sale between B and X is valid or not? (ICAI
MODULE)
Law According to Section 28 of the Sales of Goods Act, sale by one of the several joint
owners is valid if the following conditions are satisfied:-
i. One of the several joint owners has the sole possession of them.
ii. Possession of the goods is by the permission of the co-owners.
iii. The buyer buys them in good faith and has not at the time of contract of sale
knowledge that the seller has no authority to sell
Conclusion In the above case, A, B and C were the joint owners of the truck and the possession
of the truck was with B. Now B sold the said truck to X. X without knowing this fact
purchased the truck from B.The sale between B and X is perfectly valid because
Section 28 of the Sales of Goods Act provides that in case one of the several joint
owners has the possession of the goods by the permission of the co-owners and if
the buyer buys them in good faith without the knowledge of the fact that seller has
no authority to sell, it will give rise to a valid contract of sale.
A, B and C were joint owner of a truck and the possession of the said truck was with
B. X purchased the truck from B without knowing that A and C were also owners of
the truck. Decide in the light of provisions of Sales of Goods Act 1930, whether the
sale between B and X is valid or not?
Hint:
According to Section 28 of the Sales of Goods Act, sale by one of the several joint owners
is valid if the following conditions are satisfied:-
(i) One of the several joint owners has the sole possession of them.
(ii) Possession of the goods is by the permission of the co-owners.
(iii) The buyer buys them in good faith and has not at the time of contract of sale knowledge
that the seller has no authority to sell.
In the above case, A, B and C were the joint owners of the truck and the possession of the
truck was with B. Now B sold the said truck to X. X without knowing this fact purchased the
truck from B.
The sale between B and X is perfectly valid because Section 28 of the Sales of Goods Act
provides that in case one of the several joint owners has the possession of the goods by
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the permission of the co-owners and if the buyer buys them in good faith without the
knowledge of the fact that seller has no authority to sell, it will give rise to a valid contract
of sale.
Practical Question
J, the owner of a fiat car wants to sell his car. For this purpose he hands over the car to P,
a mercantile agent for sale at a price not less than ? 50,000. The agent sells the car for
40,000 to A, who buys the car in good faith without notice of any fraud. P misappropriated
the money also. J sues A for the recovery of the car. Decide with reasons whether J would
succeed? (C. A. Foundation RTP May 2018) (Module)
Law Sale by mercantile agent is valid and binding on the principal provided the
(a) agent is in possession of the goods or documents of title with the consent
of the owner,
(b) the agent sells the goods while acting in the ordinary course of business of
agency,
(c) the buyer should have acted in good faith & the buyer should not have notice
that at the time of sale, the agent had no authority to sell
Conclusion In the given case P the agent was in possession of the goods with the consent
of J. The car was sold by P in the ordinary course of business of agency and
the car was bought by A in good faith without notice that agent was not
authorised to sell it for ` 40,000. Thus sale is valid and A acquires a good title
to the car & J will not succeed in recovering the car from A. J can only proceed
against his agent lawfully
Practical Question
Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return basis.
After a week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now claims back
the motor car from Mr. Ganesh. Will she succeed? Referring to the provisions of the Sale of
Goods Act, 1930, decide and examine what recourse is available to Ms. Preeti. (C.A.
Foundation Nov 2018, RTP & MTP) (Module)
Law When goods are delivered on approval (Sec. 24): When goods are delivered to
the buyer on approval or ‘on sale or return,’ or on other similar terms, the
property therein passes to the buyer :
(i) When he signifies his approval or acceptance to the seller, or '
(ii) When the buyer does any other act adopting the transaction, e.g.,
pledges the goods or resells them.
(iii) When the buyer retains the goods, without giving notice of rejection,
beyond the time fixed for the return of goods, or if no time has been
fixed, beyond a reasonable time. In short, the property passes either
by acceptance or by failure to return the goods within specified or
reasonable time.
Conclusion In the given case Ms. Preeti has handed over the car to Mr. Joshi on sale or
return basis and afterwards Mr. Joshi pledges the car with Mr. Ganesh.
Applying the above stated provisions it can be concluded that pledging of the
car by Mr. Joshi amounts to adoption of the transaction. Thus property in car
passes on to Mr. Joshi on pledge and Ms. Preeti cannot claim back the car. She
is only entitled to claim the price of the motor car since the property therein has
passed to Mr. Joshi.
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PERFORMANCE OF THE CONTRACT OF SALE

The performance of a contract of sale implies delivery of goods by the seller and acceptance of the
delivery of goods and payment of price for them by the buyer in accordance of the terms of the
contract.
Delivery of Goods
1. Meaning [Sec. 2]: Delivery means voluntary transfer of possession from one person to
another.
2. Duty of Seller [Sec. 31]: It is the duty of the Seller to deliver the goods and of the buyer to accept
and pay for them in accordance with the contract of Sale.
3. Payment and delivery are concurrent conditions (Section 32): Unless otherwise agreed,
delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller
shall be ready and willing to give possession of the goods to the buyer in exchange for the price,
and the buyer shall be ready and willing to pay the price in exchange for possession of the goods
TYPES OF DELIVERY
(1) Actual Delivery:
Goods are physically handed over to the Buyer or his authorised agent i.e. actual transfer of
physical custody.
(2) Constructive Delivery:
When transfer of goods is effected without any change in the custody or actual possession of the
thing as in the case of delivery by attornment (acknowledgement)
Where a warehouseman holding the goods of A agrees to hold them on behalf of B, at A’s
request. Constructive delivery takes place when a person in possession of the goods
belonging to the seller acknowledges to the buyer that he holds the goods on buyer’s
behalf.
(3) Symbolic Delivery:

Where Goods are bulky / heavy and it is not possible to physically hand over them to the Buyer,
some symbol which carries with it the real possession or control over the goods is handed over to
the Buyer.
Delivery of godown keys where Goods are lying, or endorsing bill of lading or railway
receipt to the Buyer.
Explain the term “Delivery and its forms” under the Sale of Goods Act, 1930.[MTP Nov
2022(6 Marks)]
Practical Question
Akash purchased 100 Kgs of wheat from Bhaskar at `80 per kg. Bhaskar says that wheat is in his
warehouse in the custody of Kishore, the warehouse keeper. Kishore confirmed to Akash that he
can take the delivery of wheat from him and till then he is holding wheat on Akash’s behalf. Before
Akash picks the goods from warehouse, the whole wheat in the warehouse has flowed in flood.
Now Akash wants his price on the contention that no delivery has been done by seller. Whether
Akash is right with his views under the Sale of Goods Act, 1930. (RTP Sep 24) .[RTP June 2023]
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Law As per the provisions of the Sale of Goods Act, 1930 there are three modes of
delivery,
i. Actual delivery,
ii. Constructive delivery and
iii. Symbolic delivery.
When delivery is affected without any change in the custody or actual possession
of the things, it is called constructive delivery or delivery by acknowledgement.
Constructive delivery takes place when a person in possession of goods belonging
to the seller acknowledges to the buyer that he is holding the goods on buyer’s
behalf
Conclusion On the basis of the above provisions and facts, it is clear that possession of the
wheat has been transferred through constructive delivery. Hence, Akash is not right.
He cannot claim the price back.
Rules regarding Delivery:

1. Delivery (Section 33): Delivery of goods sold may be made by doing anything which the parties
agree shall be treated as delivery or which has the effect of putting the goods in the possession of the
buyer or of any person authorised to hold them on his behalf.
2. Effect of part delivery [Sec.34]: A delivery of part of goods, in progress of the delivery of the
whole has the same effect, for the purpose of passing the property in such goods, as a delivery
of the whole; but a delivery of part of the goods, with an intention of severing it from the whole,
does not operate as a delivery of the remainder.
Certain goods lying at wharf were sold in a lot. The seller instructed the wharfinger to deliver
them to the buyer who had paid for them and the buyer, thereafter, accepted them and took
away part. Held, there was delivery of the whole
‘A’ purchased 975 bales of rice being the whole contents of a Gola, paid earnest money
and took part delivery of rice. The rest was afterwards destroyed by fire. ‘A’ is liable to pay
the balance of the price in respect of the goods destroyed because the Property in goods
being passed on part delivery.
3. Buyer to apply for delivery [Sec.35]: Apart from any express contract, the Seller is not bound
to deliver them until the Buyer applies for delivery.
4. Place of delivery [Sec. 36(1)]:
Nature of Goods Place of delivery
Delivery of goods sold At the place at which they are at the time of sale
Delivery of goods agreed to be sold At the place at which they are at the time of the
agreement to sell.
Delivery of goods not in existence at the At the place at which they are manufactured or
time of agreement (future goods) produced.
5. Time of delivery [Sec. 36(2)]: Where under the contract of sale, the seller is bound to send the
goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within
a reasonable time
6. Goods in possession of a third party [Sec. 36(3)]: When at the time of sale, Goods lie in the
possession of a third party, for an effective delivery by Seller to Buyer, the third party should
acknowledge to Buyer that he holds them on the Buyer’s behalf. If goods have been sold by
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transfer of document of title to Goods, no such consent / acknowledgement by the third party is
required.
7. Time for tender of delivery: Demand or tender of delivery may be treated as ineffectual unless
made at a reasonable hour. What is reasonable hour is a question of fact. [Section 36(4)].
8. Expenses of delivery [Sec. 36(5)]: Unless otherwise agreed upon by the parties, the expenses
of and incidental to putting the goods into a deliverable state shall be borne by the Seller.
9. Delivery of wrong quantity [Sec.37]:
Subject to any usage of trade or agreement between parties, the Buyer has the following rights
when wrong quantity is delivered—
Option to Buyer in case of delivery of Wrong Quantity
Short Delivery Excess Delivery Mixed Delivery

[Less than contracted] [More than contracted] [With Goods of different
(a) Reject the goods or (a) Reject in full or description]
(b) Accept and pay as per (b) Accept the contract (a) Accept the contracted Goods
the contracted rate. quantity and reject the and reject the rest, or
excess or (b) Reject the entire lot.
(c) Accept the whole. (c) Cannot accept the other
goods which has not been
called
Practical Question
Mr. G sold some goods to Mr. H for a certain price by issue of an invoice, but payment in respect
of the same was not received on that day. The goods were packed and lying in the godown of Mr.
G. The goods were inspected by H's agent and were found to be in order. Later on, the dues of the
goods were settled in cash. Just after receiving cash, Mr. G asked Mr. H that goods should be
taken away from his godown to enable him to store other goods purchased by him. After one day,
since Mr. H did not take delivery of the goods, Mr. G kept the goods out of the godown in an open
space. Due to rain, some goods were damaged.
Referring to the provisions of the Sale of Goods Act, 1930, analyse the above situation and decide
who will be held responsible for the above damage. Will your answer be different if the dues were
not settled in cash and are still pending? (MTP May 24) (7 Marks)
Law According to section 44 of the Sale of Goods Act, 1930, when the seller is ready
and willing to deliver the goods and requests the buyer to take delivery, and the
buyer does not within a reasonable time after such request take delivery of the
goods, he is liable to the seller for any loss occasioned by his neglect or refusal to
take delivery and also for a reasonable charge for the care and custody of the
goods.
Risk of loss of goods prima facie follows the passing of property in goods. Goods
remain at the seller's risk unless the property there in is transferred to the buyer,
but after transfer of property therein to the buyer, the goods are at the buyer's risk
whether delivery has been made or not
Conclusion In the given case, since Mr. G has already intimated Mr. H, that he wanted to store
some other goods and thus Mr. H should take the delivery of goods kept in the
godown of Mr. G, the loss of goods damaged should be borne by Mr. H
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Practical Question
Against B’s tender, R agrees to sell and deliver 1,000 kg tomatoes @ ₹100 per kg which shall be
delivered on 15th July, 2023. Due to the rise of the prices of tomatoes in the market, R delivered
only 700 kg of tomatoes on 15th July, 2023 and agrees to deliver the balance quantity in the next
month. B accepted 700 kg of tomatoes sent by R. Later, R failed to deliver the balance quantity
and so B refused to pay the price of 700 kg of tomatoes to R as he had failed to fulfill the tender
conditions stipulated in the contract of sale.Can B refuse to pay R as per the provisions of the Sale
of Goods Act, 1930?[Dec 2023 (2 Marks)]
Law According to Section 37(1) of the Sale of Goods Act, 1930, where the seller delivers
to the buyer a quantity of goods less than he contracted to sell, the buyer may reject
them, but if he accepts the goods so delivered, he shall pay for them at the contract
rate
Conclusion According to Section 37(1) of the Sale of Goods Act, 1930, where the seller delivers
to the buyer a quantity of goods less than he contracted to sell, the buyer may
reject them, but if he accepts the goods so delivered, he shall pay for them at
the contract rate.
In the instant case, R delivered 700 kg of tomatoes on 15th July, 2023 and
agrees to deliver 300 kg in the next month. Later R failed to deliver the balance
quantity and B (buyer) refused to pay the price of 700 kg of tomatoes.
Considering the above provisions, we can conclude that B cannot refuse to
pay for 700 kg of tomatoes to R.
Important Note: The answer can also be given as per Section 34 of the Sale
of Goods Act, 1930, which provides that a delivery of part of goods, in
progress of the delivery of the whole has the same effect, for the purpose of
passing the property in such goods, as a delivery of the whole.
In the instant case, R delivered 700 kg of tomatoes on 15th July, 2023 and
agrees to deliver 300 kg in the next month. Later R failed to deliver the balance
quantity and B (buyer) refused to pay the price of 700 kg of tomatoes.
Considering the above provisions, we can conclude that B cannot refuse to
pay for 700 kg of tomatoes to R.
Practical Question
A contract with B to buy 50 chairs of a certain quality. B delivers 25 chairs of the type agreed upon
and 25 chairs of some other type. Under the circumstances, what are the rights of A against
B under the Sale of Goods Act, 1930? [RTP Nov 2022]
Law As per Section 37(3) of the Sale of Goods Act, 1930 where the seller delivers to the
buyer the goods, he contracted to sell mixed with goods of a different description
not included in the contract, the buyer may accept the goods which are in
accordance with the contract and reject the rest or may reject the whole
Conclusion Hence, A may accept 25 chairs of the type agreed upon and may reject the other
25 chairs of some other type not agreed upon or may reject all 50 chairs
10. Instalment deliveries [Sec. 38]:

Unless otherwise agreed between the parties, the Buyer is not bound to accept delivery by
instalments.
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There was sale of 100 tons of paper to be shipped in November. The seller shipped 80
tons in November and 20 tons in December. The buyer was entitled to reject the whole
100 tons
11. Delivery to carrier or Wharfinger [Sec.39]:

Subject to the terms of contract, the delivery of the goods to the carrier for transmission to the
buyer, is prima facie deemed to be delivery to the buyer.
12. Deterioration during transit: Where goods are delivered at a distant place, the liability for
deterioration necessarily incidental to the course of transit will fall on the buyer, though the seller
agrees to deliver at his own risk. (Section 40)
P sold to Q a certain quantity of iron rods which were to be sent by proper vessel. It was
rusted before it reached the buyer. The rust of the rod was so minimal and was not
effecting the merchantable quality and the deterioration was not necessarily incidental to
its transmission. It was held that Q was bound to accept the goods.
13. Buyer’s right of examining Goods [Sec. 41(1)]:

Where Goods are delivered to the Buyer which had not been inspected previously by him, it is the
duty of the Seller to give a reasonable opportunity of examining them to ascertain that the Goods
delivered are in conformity with the contract.
14. Acceptance by Buyer [Sec. 42]:
The Buyer is deemed to have accepted the Goods—
(a) When he intimates to the Seller that he has accepted them, or
(b) When goods are delivered to him, he does some action which is inconsistent with the
ownership of the Seller, or
(c) When, after the lapse of a reasonable time, he retains the goods without intimating the Seller
that he has rejected the goods.
15. Buyer not bound to return rejected goods [Sec. 43]:
(a) Unless otherwise agreed, where goods are delivered to buyer and he refuses to accept them
(having the right to do so), he is not bound to return them to the seller.
(b) It is sufficient if the buyer intimates the seller that he refuses to accept them.
(c) When the seller refuses to take back the Goods, the buyer becomes the bailee of such goods
and he may charge the Seller for the custody of his Goods.
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Unit 4
4
MEANING OF UNPAID SELLER
UNPAID SELLER &
AUCTION SALE
(i) The whole price has not been paid or tendered,

(ii) If a bill of exchange or other negotiable instrument is received, which has been dishonored.
(iii) If buyer becomes insolvent then the seller is unpaid seller.
(iv) Goods sold without any stipulation to credit
(v) Goods sold on credit but credit period expired
RIGHTS OF AN UNPAID SELLER (sec 46)

(1) Rights against the goods
(a) Where the ownership of the goods has transferred to the buyer:
(i) Rights of lien
(ii) Right of stoppage the goods
(iii) Right of resale
(b) Where the ownership of the goods has not been transferred to the buyer In this case, the
unpaid seller has the right of withholding the delivery of goods sold.
Thus, the seller is under no obligation to deliver the goods to the buyer and he will not be
liable for non-delivery until the price of the goods is tendered to him by the buyer.
(2) Right against the buyer
(a) Suit for price
(b) Suit for damages
(c) Suit for interest
(d) Suit for repudiation of contract
Mr. D sold some goods to Mr. E for r 5,00,000 on 15 days credit. Mr. D delivered the goods.
On due date, Mr. E refused to pay for it. State the position and rights of Mr. D as per the
Sale of Goods Act, 1930. (ICAI MODULE)
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RIGHT OF LIEN - Sec. 47, 48, 49

1. MEANING
The right of lien is the right to retain possession of the goods. An unpaid seller of the goods who
is in possession of them, has a right to retain goods in his possession until the full payment of the
price is made or tendered to him in the following cases:
2. AN UNPAID SELLER CAN EXERCISE HIS RIGHT OF LIEN IF

(a) where goods have been sold without any stipulation of credit; (i.e., on cash sale)
(b) where goods have been sold on credit but the term of credit has expired; or
(c) Where the buyer becomes insolvent.
3. NATURE OF RIGHT IF LIEN

 The right of lien is indivisible in nature.
 An unpaid seller can exercise the right of lien on the whole goods in possession of him, even
if part payment for the same has been made by the buyer.
 Thus, a buyer cannot demand proportionate delivery of goods for the part payment made by
him.
 (Section 48): 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
4. TERMINATION OF THE RIGHT OF LIEN (Section 49):

When possession is lost, lien is lost
Unpaid seller losses his right of lien in the following cases:
(a) Where the goods are delivered to the carrier or other bailee by the seller for the purpose of
transmission to the buyer, without reserving the right of disposal of the goods.
(b) Where the buyer or his agent lawfully obtains possession of the goods.
(c) Where the seller waives off his right of lien. Waiver may be express or implied.
(d) By Estoppel i.e., where the seller so conducts himself that he leads third parties to believe that
the lien does not exist.
The unpaid seller of the goods, having a lien thereon, does not lose his lien by reason only
that he has obtained a decree for the price of the goods
1: A sold certain goods to B for a price ` 50,000 and allowed him to pay the price within one
month. B becomes insolvent during this period of credit. A, the unpaid seller, can exercise
his right of lien.
2: A, sold a car to B for ` 1,00,000 and delivered the same to the railways for the purpose
of transmission to the buyer. The railway receipt was taken in the name of B and sent to B.
Now A cannot exercise the right of lien
When can an unpaid seller of goods exercise his right of lien over the goods under the Sale
of Goods Act? Can he exercise his right of lien even if the property in goods has passed to
the buyer? When such a right is terminated? Can he exercise his right even after he has
obtained a decree for the price of goods from the court? (ICAI MODULE)
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Can an unpaid seller who has possession of goods exercise the Right of lien? If yes, mention
such circumstances. When does he lose his right of line as per the provisions of the Sale of
Goods Act, 1930? [Dec 2023(6 Marks)]
Practical Question
A agrees to sell certain goods to B on a certain date on 10 days credit. The period of 10 days
expired and goods were still in the possession of A. B has also not paid the price of the goods. B
becomes insolvent. A refuses to deliver the goods to exercise his right of lien on the goods. Can
he do so under the Sale of Goods Act, 1930? (ICAI MODULE) (MTP Apr. 24) (4 Marks)
Law Lien is the right of a person to retain possession of the goods belonging to another
until claim of the person in possession is satisfied. The unpaid seller has also right
of lien over the goods for the price of the goods sold.
Section 47(1) of the Sales of Goods Act, 1930 provides that the unpaid seller who
is in the possession of the goods is entitled to exercise right of lien in the following
cases:-
(i) Where the goods have been sold without any stipulation as to credit
(ii) Where the goods have been sold on credit but the term of credit has expired
(iii) Where the buyer has become insolvent even though the period of credit has
not yet expired
Conclusion In the given case, A has agreed to sell certain goods to B on a credit of 10 days.
The period of 10 days has expired. B has neither paid the price of goods nor taken
the possession of the goods. That means the goods are still physically in the
possession of A, the seller. In the meantime B, the buyer has become insolvent. In
this case, A is entitled to exercise the right of lien on the goods because the buyer
has become insolvent and the term of credit has expired without any payment of
price by the buyer
Practical Question
J sold a machine to K. K gave a cheque for the payment. The cheque was dishonoured. But J
handed over a delivery order to K. K sold the goods to R on the basis of the delivery order. J
wanted to exercise his right of lien on the goods. Can he do so under the provisions of the Sale of
Goods Act, 1930? (ICAI MODULE)
Law The right of lien and stoppage in transit are meant to protect the seller. These will
not be affected even when the buyer has made a transaction of his own goods
which were with the seller under lien. But under two exceptional cases these
rights of the seller are affected:-
i. When the buyer has made the transaction with the consent of the seller
ii. When the buyer has made the transaction on the basis of documents of
title such as bill of lading, railway receipt or a delivery order etc.
Conclusion In the given case, J has sold the machine to K and K gave a cheque for the payment.
But the cheque was dishonoured that means J, the seller is an unpaid seller. So,
he is entitled to exercise the right of lien, but according to section 53(1) his right of
lien is defeated because he has given the document of title to the buyer and the
buyer has made a transaction of sale on the basis of this document. So, R who has
purchased the machine from K can demand the delivery of the machine
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Practical Question
Mr. Shankar sold 1000 Kgs wheat to Mr. Ganesh on credit of 3 months. Wheat was to be delivered
after 10 days of contract. After 5 days of contract, a friend of Mr. Shankar secretly informed him
that Mr. Ganesh may default in payment. On the information of friend, Mr. Shankar applied the right
to lien and withheld the delivery. With referring to the provisions of the Sale of Goods Act, 1930:
(RTP June 2024)
(i) State, whether Mr. Shankar was right in his decision?
(ii) What would be your answer if Mr. Ganesh became insolvent within five days of contract?
Law According to Section 45(1) of the Sale of Goods Act, 1930 the seller of goods is
deemed to be an ‘Unpaid Seller’ when-
(a) The whole of the price has not been paid or tendered.
(b) A 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.
Further, Section 47 provides about an unpaid seller’s right of lien. Accordingly, an
unpaid seller can retain the possession of the goods and refusal to deliver them to
the buyer until the price due in respect of them is paid or tendered. This right can
be exercised by him in the following cases only:
(a) where goods have been sold without any stipulation of credit; (i.e., on
cash sale)
(b) where goods have been sold on credit, but the term of credit has expired;
or
(c) (c) where the buyer becomes insolvent.
Conclusion In the instant case, Mr. Ganesh purchased 1000 Kg wheat from Mr. Shankar on 3
month’s credit which was to be delivered after 10 days of contract. But, after 5 days
of contract, one friend of Mr. Shankar secretly informed him that Mr. Ganesh may
default in payment. On the belief of friend, Mr. Shankar applied the right to lien and
withheld the delivery.
(i) On the basis of above provisions and facts, it can be said that even Mr. Ganesh
was an unpaid seller until the term of credit i.e. has expired, Mr. Shankar had to
perform his promise of supplying 1000 Kg of wheat.
(ii) In case Mr. Ganesh became insolvent before the delivery of wheat, Mr. Shankar
had the right to apply the lien and he could withhold the delivery
RIGHT OF STOPPAGE IN TRANSIT – Sec. 50 to 52

1. Meaning
 The right of stoppage in transit means the right of stopping the goods while they are in transit, to
regain the possession and to retain them till the full price is paid.
 When the unpaid seller has parted with the goods to a carrier and the buyer has become insolvent,
he can exercise this right of asking the carrier to return the goods back, or not to deliver the goods
to the buyer.
 This right is the extension of the right of lien because it entitles the seller to regain possession
even when the seller has parted with the possession of the goods.
2. Conditions of excercising right of stoppage in transit

(a) The seller must be unpaid.
(b) The buyer must be insolvent.
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(c) The property in goods has already passed to the buyer.

(d) The goods must be in transit.
(e) It should be with independent middle men neither agent of seller or agent of buyer.
3. Duration of transit
 The duration of transit is the period between the commencement and end of transit.
 The transit commences from the time when the goods are delivered to the middlemen (carrier
or other bailee) and it continues till the buyer or his agent takes the delivery of the goods.
4. Transit comes to an end in the following cases

(a) Where the buyer or his agent obtains delivery of the goods before they arrive at the appointed
destination.
(b) Where after the arrival of the goods at the appointed destination, the carrier or the other bailee
acknowledges to the buyer or his agent that he holds the goods on his behalf.
(c) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his
agent.
(d) Where after the arrival of the goods at the appointed destination, the buyer further directs the
carrier to take the goods somewhere on behalf of the buyer.
(e) Where the goods are delivered to a ship chartered by the buyer and the ship's acting as an
agent of the buyer.
5. The unpaid seller may exercise his right of stoppage in transit either
(a) By taking actual possession of the goods.
(b) By giving notice of his claim to the carrier or the other bailee in whose possession the goods
are.
1: B at Delhi, orders goods of A, at Mumbai. A consigns and forwards the goods to B. On
arrival at Delhi, they are taken to B‘s warehouse and left there. B refuses to take these
goods and stop payment. The goods are in transit and the unpaid seller can take them back
2: A sold certain goods to B of Mumbai and the goods are handed over to railways for
transmission to B. In the mean time, B sold these goods to C for consideration. B becomes
insolvent. A can still exercise his right of stoppage in transit
Exceptions where unpaid seller’s right of lien and stoppage in transit are
defeated:
(a) When the seller has assented to the sale, mortgage or other disposition of the goods made by the
buyer.
A entered into a contract to sell cartons in possession of a wharfinger to B and agreed with
B that the price will be paid to A from the sale proceeds recovered from his customers. Now
B sold goods to C and C duly paid to B. But anyhow B failed to make the payment to A. A
wanted to exercise his right of lien and ordered the wharfinger not to make delivery to C.
Held that the seller had assented to the resale of the goods by the buyer to the sub-buyers.
As a result A’s right to lien is defeated (Mount D. F. Ltd. vs Jay & Jay (Provisions) Co.
Ltd).
(b) When a document of title to goods has been transferred to the buyer and the buyer transfers the
documents to a person who has bought goods in good faith and for value i.e. for price, then, the
proviso of sub-section (1) stipulates as follows:
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(i) If the last-mentioned transfer is by way of sale, right of lien or stoppage in transit is defeated,
or
(ii) If the last mentioned transfer is by way of pledge, unpaid seller’s right of lien or stoppage only
be exercised, subject to the rights of the pledgee.
However, the pledgee may be required by the unpaid seller to use in the first instance, other goods
or securities of the pledger available to him to satisfy his claims. [Sub-section (2)].
Practical Question
Ram sells 200 bales of cloth to Shyam and sends 100 bales by lorry and 100 bales by Railway.
Shyam receives delivery of 100 bales sent by lorry, but before he receives the delivery of the bales
sent by railway, he becomes bankrupt. Can Ram exercise right of stopping the goods in transit?
(ICAI MODULE) (MTP Apr. 24) (3 Marks) .(MTP May 24) (4 Marks)
Law Right of stoppage of goods in transit: The problem is based on Section 50 of the
Sale of Goods Act, 1930 dealing with the right of stoppage of the goods in transit
available to an unpaid seller. The section states that the right is exercisable by the
seller only if the following conditions are fulfilled.
(i) The seller must be unpaid
(ii) He must have parted with the possession of goods
(iii) The goods must be in transit
(iv) The buyer must have become insolvent
(v) The right is subject to the provisions of the Act
Conclusion Applying the provisions to the given case, Ram being still unpaid, can stop the 100
bales of cloth sent by railway as these goods are still in transit. He may recover the
price of other 100 bales sent by lorry by using his rights against the buyer
Practical Question
A, who is an agent of a buyer, had obtained the goods from the Railway Authorities and loaded the
goods on his truck. In the meantime, the Railway Authorities received a notice from B, the seller for
stopping the goods in transit as the buyer has become insolvent.Referring to the provisions of Sale
of Goods Act, 1930, decide whether the Railway Authorities can stop the goods in transit as
instructed by the seller? (ICAI MODULE)
Law The right of stoppage of goods in transit means the right of stopping the goods after
the seller has parted with the goods. Thereafter the seller regains the possession
of the goods.
This right can be exercised by an unpaid seller when he has lost his right of lien
over the goods because the goods are delivered to a carrier for the purpose of
taking the goods to the buyer. This right is available to the unpaid seller only when
the buyer has become insolvent. The conditions necessary for exercising this right
are:-
(i) The buyer has not paid the total price to the seller
(ii) The seller has delivered the goods to a carrier thereby losing his right of lien
(iii) The buyer has become insolvent
(iv) The goods have not reached the buyer, they are in the course of transit.
(Section 50, 51 and 52)
Conclusion In the given case A, who is an agent of the buyer, had obtained the goods from the
railway authorities and loaded the goods on his truck. After this the railway
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authorities received a notice from the seller B to stop the goods as the buyer had
become insolvent.
According to the Sale of Goods Act, 1930, the railway authorities cannot stop the
goods because the goods are not in transit. A who has loaded the goods on his
truck is the agent of the buyer. That means railway authorities have given the
possession of the goods to the buyer. The transit comes to an end when the buyer
or his agent takes the possession of the goods
Practical Question
Ravi sold 500 bags of wheat to Tushar. Each bag contains 50 Kilograms of wheat. Ravi sent 450
bags by road transport and Tushar himself took remaining 50 bags. Before Tushar receives delivery
of 450 bags sent by road transport, he becomes bankrupt. Ravi being still unpaid, stops the bags
in transit. The official receiver, on Tushar's insolvency claims the bags. Decide the case with
reference to the provisions of the Sale of Goods Act, 1930.[RTP Dec 2023]
Law Right of stoppage in transit (Section 50 of the Sale of Goods Act, 1930):
(a) 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 paid or tendered
price of the goods.
(b) When the unpaid seller has parted with the goods to a carrier and the buyer has
become insolvent, he can exercise this right of asking the carrier to return the goods
back, or not to deliver the goods to the buyer
Conclusion In the instant case, Tushar, the buyer becomes insolvent, and 450 bags are in transit.
Ravi, the seller, can stop the goods in transit by giving a notice of it to Tushar. The
official receiver, on Tushar’s insolvency cannot claim the bags.
RIGHT OF RESALE
The right of resale is a very valuable right given to an unpaid seller. In the absence of this right, the
unpaid seller’s other rights against the goods that is lien and the stoppage in transit would not have
been of much use because these rights only entitled the unpaid seller to retain the goods until paid
by the buyer.
The unpaid seller can exercise the right to re-sell the goods under the following conditions:
(i) Where the goods are of a perishable nature: In such a case, the buyer need not be informed
of the intention of resale.
(ii) Where he gives notice to the buyer of his intention to re-sell the goods: If after the receipt
of such notice the buyer fails within a reasonable time to pay or tender the price, the seller may
resell the goods.
It may be noted that in such cases, on the resale of the goods, the seller is also entitled to:
a) Recover the difference between the contract price and resale price, from the original buyer,
as damages.
b) Retain the profit if the resale price is higher than the contract price.
It may also be noted that the seller can recover damages and retain the profits only when the
goods are resold after giving the notice of resale to the buyer. Thus, if the goods are resold by the
seller without giving any notice to the buyer, the seller cannot recover the loss suffered on resale.
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Moreover, if there is any profit on resale, he must return it to the original buyer, i.e. he cannot keep
such surplus with him [Section 54(2)].
(iii) Where an unpaid seller who has exercised his right of lien or stoppage in transit resells
the goods: The subsequent buyer acquires the good title thereof as against the original buyer,
despite the fact that the notice of re-sale has not been given by the seller to the original buyer.
(iv) A re-sale by the seller where a right of re-sale is expressly reserved in a contract of sale:
Sometimes, it is expressly agreed between the seller and the buyer that in case the buyer makes
default in payment of the price, the seller will resell the goods to some other person. In such cases,
the seller is said to have reserved his right of resale, and he may resell the goods on buyer’s
default.
It may be noted that in such cases, the seller is not required to give notice of resale. He is entitled
to recover damages from the original buyer even if no notice of resale is given.
(v) Where the property in goods has not passed to the buyer: The unpaid seller has in addition
to his remedies a right of withholding delivery of the goods. This right is similar to lien and is called
“quasi-lien”. This is the additional right used in case of agreement to sell.
RIGHT AGAINST THE BUYER

Rights of unpaid seller against the buyer personally: An unpaid seller can enforce certain rights
against the goods as well as against the buyer personally. Rights of unpaid seller against the buyer
are otherwise known as seller’s remedies for breach of contract of sale. The rights of the seller against
the buyer personally are called rights in personam and are in addition to his rights against the goods.
The right against the buyer are as follows:
1. Suit for price (Section 55)
a) Where under a contract of sale, the property in the goods has passed to the buyer and the
buyer wrongfully neglects or refuses to pay for the goods according to the terms of the
contract, the seller may sue him for the price of the goods. [Section 55(1)] (This is the case of
contract of sale)
b) Where under a contract of sale, the price is payable on a certain day irrespective of delivery
and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the
price although the property in the goods has not passed and the goods have not been
appropriated to the contract. [Section 55(2)]. (This is the case of agreement to sell)
2. Suit for damages for non-acceptance (Section 56): Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance.
As regards measure of damages, Section 73 of the Indian Contract Act, 1872 applies in this case.
3. Repudiation of contract before due date (Section 60): Where the buyer repudiates the
contract before the date of delivery, the seller may treat the contract as rescinded and sue
damages for the breach. This is known as the ‘rule of anticipatory breach of contract’.
4. Suit for interest [Section 61]: Where there is specific agreement between the seller and the
buyer as to interest on the price of the goods from the date on which payment becomes due, the
seller may recover interest from the buyer. If, however, there is no specific agreement to this
effect, the seller may charge interest on the price when it becomes due from such day as he may
notify to the buyer.
In the absence of a contract to the contrary, the Court may award interest to the seller in a suit by
him at such rate as it thinks fit on the amount of the price from the date of the tender of the goods
or from the date on which the price was payable.
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Practical Question
Suraj sold his car to Sohan for r 75,000. After inspection and satisfaction, Sohan paid r 25,000 and
took possession of the car and promised to pay the remaining amount within a month. Later on,
Sohan refuses to give the remaining amount on the ground that the car was not in a good condition.
Advise Suraj as to what remedy is available to him against Sohan. (ICAI MODULE)
Law As per the section 55 of the Sale of Goods Act, 1930 an unpaid seller has a right
to institute a suit for price against the buyer personally. The said Section lays
down that
i. Where under a contract of sale the property in the goods has passed to
buyer and the buyer wrongfully neglects or refuses to pay for the goods,
the seller may sue him for the price of the goods [Section 55(1)].
ii. Where under a contract of sale the price is payable on a certain day
irrespective of delivery and the buyer wrongfully neglects or refuses to pay
such price, the seller may sue him for the price. It makes no difference
even if the property in the goods has not passed and the goods have not
been appropriated to the contract [Section 55(2)]
Conclusion This problem is based on above provisions. Hence, Suraj will succeed against
Sohan for recovery of the remaining amount. Apart from this, Suraj is also entitled
to:-
(i) Interest on the remaining amount
(ii) Interest during the pendency of the suit.
(iii) Costs of the proceedings
Suraj sold his car to Sohan for ` 75,000. After inspection and satisfaction, Sohan paid
` 25,000 and took possession of the car and promised to pay the remaining amount
within a month. Later on, Sohan refuses to give the remaining amount on the ground
that the car was not in a good condition. Advise Suraj as to what remedy is available
to him against Sohan. (RTP Sep 24)
Hint:
As per the section 55 of the Sale of Goods Act, 1930 an unpaid seller has a right to institute
a suit for price against the buyer personally. The said Section lays down that
(i) Where under a contract of sale the property in the goods has passed to buyer and
the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue
him for the price of the goods [Section 55(1)].
(ii) Where under a contract of sale the price is payable on a certain day irrespective of
delivery and the buyer wrongfully neglects or refuses to pay such price, the seller
may sue him for the price.
It makes no difference even if the property in the goods has not passed and the goods have
not been appropriated to the contract [Section 55(2)].
This problem is based on above provisions. Hence, Suraj will succeed against Sohan for
recovery of the remaining amount. Apart from this, Suraj is also entitled to:-
(1) Interest on the remaining amount
(2) Interest during the pendency of the suit.
(3) Costs of the proceedings.
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A, who is an agent of a buyer, had obtained the goods from the Railway Authorities
and loaded the goods on his truck. In the meantime, the Railway Authorities received
a notice from B, the seller for stopping the goods in transit as the buyer has become
insolvent. Referring to the provisions of Sale of Goods Act, 1930, decide whether the
Railway Authorities can stop the goods in transit as instructed by the seller?
Hint:
The right of stoppage of goods in transit means the right of stopping the goods after the
seller has parted with the goods. Thereafter the seller regains the possession of the goods.
This right can be exercised by an unpaid seller when he has lost his right of lien over the
goods because the goods are delivered to a carrier for the purpose of taking the goods to
the buyer. This right is available to the unpaid seller only when the buyer has become
insolvent. The conditions necessary for exercising
this right are:-
1. The buyer has not paid the total price to the seller
2. The seller has delivered the goods to a carrier thereby losing his right of lien
3. The buyer has become insolvent
4. The goods have not reached the buyer, they are in the course of transit. (Section
50, 51 and 52)
In the given case A, who is an agent of the buyer, had obtained the goods from the railway
authorities and loaded the goods on his truck. After this the railway authorities received a
notice from the seller B to stop the goods as the buyer had become insolvent.
According to the Sales of Goods Act, 1930, the railway authorities cannot stop the goods
because the goods are not in transit. A who has loaded the goods on his truck is the agent
of the buyer. That means railway authorities have given the possession of the goods to the
buyer. The transit comes to an end when the buyer or his agent takes the possession of the
goods.
J sold a machine to K. K gave a cheque for the payment. The cheque was
dishonoured. But J handed over a delivery order to K. K sold the goods to R on the
basis of the delivery order. J wanted to exercise his right of lien on the goods. Can
he do so under the provisions of the Sale of Goods Act, 1930?
Hint:
The right of lien and stoppage in transit are meant to protect the seller. These will not be
affected even when the buyer has made a transaction of his own goods which were with
the seller under lien. But under
two exceptional cases these rights of the seller are affected:-
1. When the buyer has made the transaction with the consent of the seller
2. When the buyer has made the transaction on the basis of documents of title such
as bill of lading, railway receipt or a delivery order etc.
In the given case, J has sold the machine to K and K gave a cheque for the payment. But
the cheque was dishonoured that means J, the seller is an unpaid seller. So he is entitled
to exercise the right of lien, but according to section 53(1) his right of lien is defeated
because he has given the document of title to the buyer and the buyer has made a
transaction of sale on the basis of this document. So R who has purchased the machine
from K can demand the delivery of the machine.
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REMEDIES OF BUYER AGAINST THE SELLER

1. Damages for non-delivery [Section 57]: Where the seller wrongfully neglects or refuses to
deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.
A’ a shoe manufacturer, agreed to sell 100 pairs of shoes to ‘B’ at the rate of ` 10,500 per
pair. ‘A’ knew that ‘B’ wanted the shoes for the purpose of further reselling them to ‘C’ at
the rate of ` 11,000/- per pair. On the due date of delivery, ‘A’ failed to deliver the shoes to
‘B’. In consequence, ‘B’ could not perform his contract with 'C’ for the supply of 100 pairs
of shoes. In this case, 'B’ can recover damages from ‘A’ at the rate of ` 500/- per pair (the
difference between the contract price and resale price).
2. Suit for specific performance (Section 58): Where the seller commits of breach of the contract
of sale, the buyer can appeal to the court for specific performance. The court can order for specific
performance only when the goods are ascertained or specific.
This remedy is allowed by the court subject to these conditions:
a) The contract must be for the sale of specific and ascertained goods.
b) The power of the court to order specific performance is subject to provisions of Specific Relief
Act of 1963.
c) It empowers the court to order specific performance where damages would not be an
adequate remedy.
d) It will be granted as remedy if goods are of special nature or are unique.
‘A’ agreed to sell a rare painting of Mughal period to ‘B’. But on the due date of delivery,
‘A’ refused to sell the same. In this case, ‘B’ may file a suit against ‘A’ for obtaining an order
from the Court to compel ‘A’ to perform the contract (i.e. to deliver the painting to ‘B’ at the
agreed price).
3. Suit for breach of warranty (Section 59): Where there is breach of warranty on the part of the
seller, or where the buyer elects to treat breach of condition as breach of warranty, the buyer is
not entitled to reject the goods only on the basis of such breach of warranty. But he may –
(i) set up against the seller the breach of warranty in diminution or extinction of the price; or
(ii) sue the seller for damages for breach of warranty.
4. Repudiation of contract before due date (Section 60): Where either party to a contract of sale
repudiates the contract before the date of delivery, the other may either treat the contract as
subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for
damages for the breach.
5. Suit for interest:
(i) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special
damages, in any case where by law interest or special damages may be recoverable, or to
recover the money paid where the consideration for the payment of it has failed.
(ii) In the absence of a contract to the contrary, the court may award interest at such rate as it
thinks fit on the amount of the price to the buyer in a suit filed by him for the refund of the price
(in a case of a breach of the contract on the part of the seller) from the date on which the
payment was made.
In case of a sale of cigarettes which turned out to be mildewed and unfit for consumption,
damages were awarded on the basis of the difference between the contract price and the
price released.
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In case of absence of transfer of title or registration, the purchaser cannot claim

damages for breach of conditions and warranties relating to sale
Describe in brief the rights of the buyer against the seller in case of breach of contract of
Sale under the Sale of Goods Act, 1930. (7 Marks) (MTP July 24)
AUCTION SALE
An ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the property is sold to the
highest bidder. An auctioneer is an agent governed by the Law of Agency. When he sells, he is only
the agent of the seller. He may, however, sell his own property as the principal and need not disclose
the fact that he is so selling.
Legal Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930 provides following rules to
regulate the sale by auction:
a) Where goods are sold in lots: Where goods are put up for sale in lots, each lot is prima facie
deemed to be subject of a separate contract of sale.
b) Completion of the contract of sale: The sale is complete when the auctioneer announces its
completion by the fall of hammer or in any other customary manner. Until such announcement is
made, any bidder may retract from his bid.
c) Right to bid may be reserved: Right to bid may be reserved expressly by or on behalf of the
seller and where such a right is expressly reserved, but not otherwise, the seller or any one person
on his behalf may bid at the auction.
d) Where the sale is not notified by the seller: Where the sale is not notified to be subject to a
right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ
any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or
any such person; and any sale contravening this rule may be treated as fraudulent by the buyer.
e) Reserved price: The sale may be notified to be subject to a reserve or upset price; and
f) Pretended bidding: If the seller makes use of pretended bidding to raise the price, the sale is
voidable at the option of the buyer.
P sold a car by auction. It was knocked down to Q who was only allowed to take it away
on giving a cheque for the price and signing an agreement that ownership should not pass
until the cheque was cleared. In the meanwhile till the cheque was cleared, Q sold the car
to R. It was held that the property was passed on the fall of the hammer and therefore R
had a good title to the car. Both sale and sub sale are valid in favour of Q and R
respectively.
INCLUSION OF INCREASED OR DECREASED TAXES IN CONTRACT OF

SALE (SECTION 64A)
Where after a contract has been made but before it has been performed, tax revision takes place.
Where tax is being imposed, increased, decreased or remitted in respect of any goods without any
stipulations to the payment of tax, the parties would become entitled to read just the price of the goods
accordingly. Following taxes are applied on the sale or purchase of goods:
 Any duty of customs or excise on goods,
 Any tax on the sale or purchase of goods
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The buyer would have to pay the increased price where the tax increases and may derive the
benefit of reduction if taxes are curtailed. Thus, seller may add the increased taxes in the price. The
effect of provision can, however, is excluded by an agreement to the contrary. It is open to the
parties to stipulate anything regard to taxation
Practical Question
An auction sale of the certain goods was held on 7th March, 2023 by the fall of hammer in favour
of the highest bidder X. The payment of auction price was made on 8th March, 2023 followed
by the delivery of goods on 10th March, 2023. Based upon on the provisions of the Sale of
Goods Act, 1930, decide when the auction sale is complete.[June 2023 (2 Marks)]
Hint According to Section 64 of the Sale of Goods Act, 1930, the sale is complete when
the auctioneer announces its completion by the fall of hammer or in any other
customary manner.
In the given question, the auction sale is complete on 7th March, 2023
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Kunal Mandhania CA Foundation
CHAPTER 1
INDIAN REGULATORY FRAMEWORK
LEARNING OUTCOMES
After studying this Chapter, you will be able to understand:
 Meaning of Law and its sources

 Types of laws in the Indian Legal System
 Enforcement of Law
 Introduction of Major Regulatory Bodies such as Ministry of Finance, MCA, SEBI, RBI, IBBI and Ministry of
Law and Justice.
Basics of Law
What is Law?  Law is a set of obligations and duties
 imposed by the government
 For securing welfare and providing justice to society.
Why Study of 1 We should possess knowledge of law so that we can advise our management and
clients on legal matters
Law is
2 You may later wish to specialise in a subject called taxation. Remember tax laws
required in are also laws
C.A 3 To govern the conduct of people interacting with each other in personal as well
as business relationships.
4 to guide us on the right course of conduct as well as to identify violations and
punish them
5 protect the rights of public and to provide remedy for wrongs
A Chartered Accountant should be aware of law because (module)
a. He has to be an expert in law
b. He has to argue in High court and Supreme court
c. He has to advice management and clients on legal matters at a basic or threshold level.
d. None of the above.
Source Of law The main sources of law in India are the

 Constitution,
 the statutes or laws made by Parliament and State Assemblies,
 Precedents or the Judicial Decisions of various Courts
 Customs and Usages.
Which of the following is not a MAIN source of law in India? (module)
a. Legal text books
b. The Parliament
Business Laws CA Wallah

c. State Assemblies
d. The Constitution
2. The Constitution of India was adopted in (module)

a. 1947
b. 1949
c. 1950
d. 1951
PROCESS OF 1 When a law is proposed in parliament it is called a Bill.

2 After discussion and debate, the law is passed in Lok Sabha.
MAKING
3 Thereafter, it has to be passed in Rajya Sabha.
LAWS 4 It then has to obtain the assent of the President of India.
5 Finally, the law will be notified by the Government in the publication called the
Official Gazette of India.
6 The law will become applicable from the date mentioned in the notification as
the effective date.
7 Once it is notified and effective, it is called an Act of Parliament.
Note –
 The laws passed by parliament may apply throughout all or a portion of India,
whereas the laws passed by state legislatures apply only within the borders of the
states concerned.
 The people who wrote the Constitution decided to divide the law-making power
between the Central Government and the various State Governments. So, the
Indian Constitution has three lists Viz., Central List, State List and Joint List.
 Depending on the list in which it figures a matter would become the subject for
Central law or a State law.
 For example, Income Tax is a Central subject. So, throughout India we have only
one law for Income Tax which is implemented by the Central Government through
the Ministry of Finance.
 We also have matters for which both Central as well as State Governments can
pass laws. Levy of stamp duty is such an example. Both Central Government and
State Government have laws governing Levy of stamp duty.
In India we follow the federal system of Government. This means that (module)
a. All the power is with the President of India
b. Powers are distributed between Centre and States
c. All the power is with the Centre
d. There are no restrictions on the power of States.

Income Tax Act, 1961 is a part of the (module)

a. Central list
b. State list
c. Joint list
d. None of the above
3. When a law is proposed in Parliament it is called (module)

a. Act
b. Statute
c. Bill
d. Notification
Types Of laws
Types of laws
Principles of
Criminal Law Civil Law Common Law
Natural Justice
Criminal Law  Criminal law is concerned with laws pertaining to violations of the rule of law or
public wrongs and punishment of the same.
 Criminal Law is governed under the Indian Penal Code, 1860, and the Code of
Criminal Procedure, 1973 (Crpc).
 The Indian Penal Code, 1860, defines the crime, its nature, and punishments
 Whereas the Criminal Procedure Code, 1973, defines exhaustive procedure for
executing the punishments of the crimes.
 Murder, rape, theft, fraud, cheating and assault are some examples of criminal
offences under the law.
The law concerned with violation of the rule of law and punishment of the same is called - (module)
a. Family law
b. Criminal law
c. Civil law
d. Property law
Civil Law  Matters of disputes between individuals or organisations are dealt with under
Civil Law.
 Civil courts enforce the violation of certain rights and obligations through the
institution of a civil suit.
 Civil law primarily focuses on dispute resolution rather than punishment.

 The act of process and the administration of civil law are governed by the Code of
Civil Procedure, 1908 (CPC).
 Civil law can be further classified into Law of Contract, Family Law, Property Law,
and Law of Tort.
 Some examples of civil offences are breach of contract, non-delivery of goods,
non-payment of dues to lender or seller defamation, breach of contract, and
disputes between landlord and tenant.
Which of the following is NOT an example of Civil law? (module)
a. Breach of contract
b. Non-delivery of goods
c. Traffic offenses
d. Non-payment of dues
Common Law  A judicial precedent or a case law is common law.

 A judgment delivered by the Supreme Court will be binding upon the courts within
the territory of India under Article 141 of the Indian Constitution.
 The doctrine of Stare Decisis is the principle supporting common law. It is a Latin
phrase that means “to stand by that which is decided.”
 The doctrine of Stare Decisis reinforces the obligation of courts to follow the same
principle or judgement established by previous decisions while ruling a case where
the facts are similar with the earlier decision.
Principles of  Natural justice, often known as Jus Natural deals with certain fundamental
principles of justice going beyond written law.
Natural
 Nemo judex in causa sua (Literally meaning “No one should be made a judge in
Justice his own cause, and it’s a Rule against Prejudice),
 audi alteram partem (Literally meaning “hear the other party or give the other
party a fair hearing), and reasoned decision are the rules of Natural Justice.
 A judgement can override or alter a common law, but it cannot override or
change the statute
Enforcing the  This is the job of the executive.

 Depending on whether a law is a Central law or a State law the Central or State
Law
Government will be the enforcing authority.
 For this purpose government functions are distributed to various ministries.
 These Ministries are headed by a minister and run by officers of the Indian
administrative and other services.
 Most major Ministries are headed by a Cabinet Minister, who sits in the Union
Council of Ministers, and is typically supported by a team of junior ministers called
the Ministers of State.
 For example, the Income Tax Act is implemented and enforced by the Ministry of
Finance through the Central Board for Direct Taxes coming under the Department
of Revenue and is administered by the officers of the Indian Revenue Service.

The Ministry  The Ministry of Finance (Vitta Mantralaya) is a Ministry within the Government of
India concerned with the economy of India, serving as the Treasury of India.
of Finance
 In particular, it concerns itself with taxation, financial legislation, financial
institutions, capital markets, centre and state finances, and the Union Budget.
 One of the important functions of the Finance Ministry is the presentation of the
Union Budget.
Constitution of the Ministry of Finance-

 is the apex controlling authority
 of four Central Civil Services, namely:
o Indian Revenue Service
o Indian Audit and Accounts Service
o Indian Economic Service and
o Indian Civil Accounts Service.
 Also the apex controlling authority of one of the central commerce services
namely Indian Cost and Management Accounts Service.
Departments under the Ministry of Finance-
Departments of Ministry of Finance

Department of
Department of Department of Investment Department of
Department of Department of
Economic Financial and Public Public
Expenditure Revenue
Affairs Services Asset Enterprises
Management
4. Which of the following is NOT a department of the Ministry of Finance? (module)

a. Department of Economic Affairs
b. Department of Expenditure
c. Department of States
d. Department of Revenue
Ministry of  Primarily concerned with administration of the Companies Act 2013, the
Corporate Affairs Companies Act 1956, the Limited Liability Partnership Act, 2008, and the
Insolvency and Bankruptcy Code, 2016.
 Responsible mainly for the regulation of Indian enterprises in the industrial and
services sector.
 The Ministry is mostly run by civil servants of the ICLS (Indian Corporate Law
service cadre.
 The highest post, Director General of Corporate Affairs (DGCoA), is fixed at Apex
Scale for the ICLS.
Ministry of Home  As an interior ministry of India, it is mainly responsible for the maintenance of
Affairs (Gṛha internal security and domestic policy.
Mantralaya)  The Home Ministry is headed by Union Minister of Home Affairs.

Departments of Ministry of Home Affairs
Department
Management
of Jammu, Department
Department Department Department Department
Kashmir and of Official
of Border of Internal of Home of States
Ladakh Language
Security
Affairs
Ministry of  deals with the
Law and  management of the legal affairs, through the Legislative Department
Justice  legislative activities through the Department of Legal Affairs
 administration of justice in India through the Department of Justice
 The Department of Legal Affairs is concerned with advising the various Ministries
of the Central Government while the Legislative Department is concerned with
drafting of principal legislation for the Central Government.
Departments of Ministry of Law and

Justice
Department
Legislative Department
of Legal
Department of Justice
Affairs
The Securities and  is the regulatory body
Exchange Board  for securities and commodity market in India
of India (SEBI)  under the ownership of Ministry of Finance within the Government of India.
 It was established on 12 April, 1988 as an executive body and was given statutory
powers on 30 January, 1992 through the SEBI Act, 1992.
Reserve Bank of  is India's Central Bank and regulatory body responsible for regulation of the
India (RBI) Indian banking system.
 It is under the ownership of Ministry of Finance, Government of India.
 It is responsible for the control, issue and maintaining supply of the Indian rupee.
 It also manages the country's main payment systems and works to promote its
economic development.
 Bharatiya Reserve Bank Note Mudran (BRBNM) is a specialised division of RBI
through which it prints and mints Indian currency notes (INR) in two of its currency
printing presses located in Nashik (Western India) and Dewas (Central India).
 RBI established the National Payments Corporation of India as one of its
specialised division to regulate the payment and settlement systems in India.

 Deposit Insurance and Credit Guarantee Corporation was established by RBI as

one of its specialised division for the purpose of providing insurance of deposits
and guaranteeing of credit facilities to all Indian banks.
STRUCTURE OF THE INDIAN JUDICIAL SYSTEM

Functions When there is a dispute between citizens or between citizens and the Government,
these disputes are resolved by the judiciary.
The functions of judiciary system of India are:
 Regulation of the interpretation of the Acts and Codes,

 Dispute Resolution,
 Promotion of fairness among the citizens of the land.
hierarchy of (i) Supreme Court
courts  The Supreme Court is the apex body of the judiciary. It was established on 26th
January, 1950.
 The Chief Justice of India is the highest authority appointed under Article 126.
 The principal bench of the Supreme Court consists of seven members including
the Chief Justice of India.
 Presently, the number has increased to 34 including the Chief Justice of India due
to the rise in the number of cases and workload.
 An individual can seek relief in the Supreme Court by filing a writ petition under
Article 32.
 Decisions of the Supreme Court are binding on all High Courts under Article 141
of the Indian Constitution.
 In fact, a Supreme Court decision is the final word on the matter.

(ii) High Court
 The highest court of appeal in each state and union territory is the High Court.
 Article 214 of the Indian Constitution states that there must be a High Court in
each state.
 The High Court has appellant, original jurisdiction, and Supervisory jurisdiction.
 In India, there are twenty-five High Courts, one for each state and union territory,
and one for each state and union territory. Six states share a single High Court.
 An individual can seek remedies against violation of fundamental rights in High
Court by filing a writ under Article 226.
 Decisions of a High Court are binding in the respective state but are only
persuasive in other states.
Which is the oldest High Court in India?

The oldest high court in the country is the Calcutta High Court, established on 2nd
July, 1862.

(iii) District Court

Below the High Courts are the District Courts. The Courts of District Judge deal with
Civil law matters i.e. contractual disputes and claims for damages etc., The Courts of
Sessions deals with Criminal matters.
Under pecuniary jurisdiction, a civil judge can try suits valuing not more than Rupees
two crore.
Jurisdiction means the power to control. Courts get territorial Jurisdiction based on
the areas covered by them. Cases are decided based on the local limits within which
the parties reside or the property under dispute is situated.
(iv) Metropolitan courts
Metropolitan courts are established in metropolitan cities in consultation with the
High Court where the population is ten lakh or more. Chief Metropolitan Magistrate
has powers as Chief Judicial Magistrate and Metropolitan Magistrate has powers as
the Court of a Magistrate of the first class.
5. Courts get territorial limits based on (module)
a. The local limits within which the party resides
b. The local limits within which the property under dispute is located
c. either a or b
d. None of the above

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Kunal Mandhania CAWALLAH

CONTRACT OF SALE [Sec. 4 (1)]

Essential elements /Features /Characteristics of contract of Sale (T/Q | A)

2 Parties Transfer of Goods Price Essential elements

Buyer & Ownership Subject Consideration As per Sec 10 of

How Contract of Sale is made (Section 5)

A contract of sale may be made in any of the following modes:

DISTINCTION BETWEEN SALE AND AN AGREEMENT TO SELL

goods but the price will not be

Sale vs Contract for work and labour

DISTINCTION BETWEEN SALE AND HIRE PURCHASE AGREEMENT

Shortcut: Sent P A R R O T to W I for Hire Purchase

BASIS OF SALE HIRE-PURCHASE AGREEMENT

Subject matter of Contract of sale - Goods Sec. 2(7)

Types of Goods. [Sec.6] (C)

(i) Specific Goods

(ii) Unascertained Goods

(iii) Ascertained Goods

Module Question-Classify the following transactions according to the types of goods

EFFECT OF DESTRUCTION OF GOODS

PRICE AND MODES OF FIXING THE PRICE

DOCUMENT OF TITLE TO GOODS

Implied Conditions: (T/Q, A+)

2. Implied condition in a sale by description (Sec. 15) :

3. Implied condition as to sample

4. Implied condition in a sale by sample as well as by description: (Sec. 15)

6. Implied condition as to merchantability:

7. Implied condition as to wholesomeness.

Law Breach of implied condition as to merchantability

Conclusion A can claim damages

Law Breach of condition as to merchantability

Conclusion D shall be entitled to return the TV and claim damages

(iii) Warranty for quality or use by usage of trade [Sec.16(3)]:

(iv) Disclosure of dangerous nature of goods:

When a condition can be treated as a warranty Sec. 13

THE DOCTRINE OF CAVEAT EMPTOR

3. M sold to L 30 tins of Australian fruits packed in case each containing 30

6. P sold a plastic catapult to G, a boy of six. While G was using it in the

Basis (A+) Condition Warranty

Transfer of Property Transfer of Transfer of Risk in

[B] Transfer of Property in Ascertained / Specific Goods [T/Q | PQ] (A):

3. Specific Goods not in a deliverable state [Sec.21]:

[C] Goods sent on Approval or on Sale or Return basis [Sec. 24]:

Seller’s reservation of the right to dispose of Goods./ Conditional

Law relating to passing of risk in Sale of Goods (Sec 26)

I Insolvent Sale by an Official Receiver or Liquidator of the Company will

property in the goods is transferred to any person who buys

PERFORMANCE OF THE CONTRACT OF SALE

(3) Symbolic Delivery:

Rules regarding Delivery:

Option to Buyer in case of delivery of Wrong Quantity

Short Delivery Excess Delivery Mixed Delivery

10. Instalment deliveries [Sec. 38]:

11. Delivery to carrier or Wharfinger [Sec.39]:

13. Buyer’s right of examining Goods [Sec. 41(1)]:

(i) The whole price has not been paid or tendered,

RIGHTS OF AN UNPAID SELLER (sec 46)

RIGHT OF LIEN - Sec. 47, 48, 49

2. AN UNPAID SELLER CAN EXERCISE HIS RIGHT OF LIEN IF