Sale of Goods Act, 1930

Definition of Goods, Buyers and Sellers

• Goods- section 2(7)

• "Goods" means every kind of moveable
property other than actionable claims and
money; and includes electricity, water, gas,
stock and shares, growing crops, grass, and
things attached to or forming part of the land
which are agreed to be severed before sale or
under the contract of sale;
• Buyer- Section 2(1)
• “Buyer" means a person who buys or agrees
to buy goods;
• Seller- Section 2(13)
• "Seller" means a person who sells or agrees to
sell goods;
 Types of Goods
• Existing Goods-section-6(1): Goods that are
already in existence.
• Future Goods- section 2(6): Goods that will be
manufactured or acquired after the contract
of sale.
• Contingent Goods- There may be a contract
for the sale of goods the acquisition of which
is dependent on contingencies which may or
may not occur.
 Contract for Sale of Goods
• According to Section 4 (1) Sale of Goods Act,
1930
• “A contract of sale of goods is a contract
whereby the seller transfers or agrees to
transfer the property in goods to the buyer for
a price.”
• A contract for sale of goods may be either a
sale or an agreement to sell
 Sale and Agreement to sale

According to Section 4 (3) 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.”
Sale
• When property of goods is transferred
immediately from seller to buyer
Agreement to Sell
• When the transfer of ownership is to take
place at a future time or subject to some
condition to be fulfilled later, the contract is
called agreement to sell.
When an agreement to sell becomes sale?

• According to Section 4 (4) Sale of Goods Act,

1930
• “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.”
 Difference between Sale and
Agreement to Sale
Basis of Distinction Sale Agreement to Sell

Contract It is an executed contract. It is an executory contract.

Transfer of property The property in the goods sold The property passes when it
passes to the buyer at the time of becomes sale on the expiry of
contract. It passes immediately. prescribed time or the fulfillment of
certain conditions.
Transfer of risk The transfer of risk takes place There is no transfer of risk of loss of
immediately. It is related to goods as ownership is not
ownership and when ownership is transferred. The loss will be borne
transferred, the risk also passes to by the seller.
the person. If there is loss of goods,
it will fall on the buyer.

Remedial measures In the case of a sale, the unpaid In case of an agreement to sell, the
seller has certain reliefs available, seller's remedy for breach of
e.g.. lien, stoppage in transit. resale contract by the buyers, is a suit for
etc. damages
 Elements of a contract for Sale of Goods
• The essential elements of a contract for the sale of goods are enumerated
below:
• Movable Goods :
The Sale of Goods Act deals only with movable goods, excepting actionable
claims and money. Sec. 2(7). This Act does not apply to immovable
properties.
• Moveable Goods for Money :
There must be a contract for the exchange of movable goods for money.
Therefore in a sale there must be money-consideration. An exchange of
goods for goods is not a sale.
• Two Parties:
Since a contract of sale involves a change of ownership, it follows that the
buyer and the seller must he different persons. A sale is a bilateral
contract. But a part-owner can sell goods to another part-owner.
Example: P & Q are each of them the owners of a certain stock of movable
goods. P can sell his rights to Q.
 Elements of a contract for Sale of Goods
• Formation of the contract of sale :
A contract of sale is made by an offer to buy or sell goods for a
price and the acceptance of such offer. The contract may
provide for the immediate delivery of the goods or
immediate payment of the price or both. Or for the delivery
and payment by installments, or that the delivery or
payment or both shall be postponed. Sec.5(1).

• Method of forming the contract :

Subject to the provision of any law for the time being in force,
a contract of sale may be in writing or by word of mouth, or
may be implied from the conduct of the parties.-Sec. 5(2)
 Elements of a contract for Sale of Goods

• The terms of contract:

The parties may agree upon any term concerning
the lime, place, and mode of delivery.
• Other essential elements :
A contract for the sale of goods must satisfy all the
essential elements necessary for the formation of
a valid contract, e.g. the parties must be
competent to contract, there must be free
consent, there must be consideration, the object
must be lawful etc.
Stipulation to Sell (Conditions and Warranties)

• Section 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.
• Condition
A condition is a stipulation essential to the main purpose
of contract the breach of which gives rise to a right to
treat the contract as repudiated.-Sec. 12(2).
• Warranty
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.-Sec. 12(3).
 Definition of Hire-purchase Agreements

• A hire-purchase agreement is one under

which a person takes delivery of goods
promising to pay the price by a certain
number of installments and, until full payment
is made, to pay hire charges for using the
goods. From this definition it can be said that
a hire-purchase agreement is a bailment plus
an agreement to sell.
 Doctrine of ‘Caveat Emptor’
• The Latin phrase ‘Caveat Emptor’ means let
the buyer beware.
• The Doctrine of Caveat Emptor means that the
responsibility lies on the buyer of goods and
he must perform due diligence before the
purchase of the goods. It is expected from the
buyer to be alert in a contract of sale. He
cannot hold the seller responsible for inferior
goods unless the contact is based on fraud.
 Doctrine of ‘Caveat Emptor’
• The seller makes the goods available in the
market and it is the responsibility of the buyer
to inspect them well before buying. If the
buyer later discovers a defect in the goods
that could have been detected earlier by him,
he cannot sue the seller for inferior quality.
 Transfer of Property
• a. Transfer of Ownership by Owner
• Unascertained Goods
• Intention of the Parties
• Specific goods
• When seller has something to do
• When goods are to be measured, tested, etc.
• Unconditional appropriation
• Delivery to the carrier
• Goods sent on approval or "on sale or return"
 Transfer of Property
• b. Transfer of Title by Non-owner
• Estoppel
• Sale by a mercantile agent
• Sale by one of several joint owners
• Sale of goods obtained under a voidable agreement
• Sale by the seller in possession of goods after sale
• Buyer in possession of goods over which the seller has
some rights
• An unpaid seller
• Sale under the Contract Act
 Transfer of Property
• a. Transfer of Ownership by Owner
• Rules, Sections 18 to 25 of the Sale of Goods
Act lay down the rules which determine when
ownership of property passes from the seller
to the buyer. These rules may be summarized
as follows:
 a. Transfer of Ownership by Owner
• Unascertained Goods
• When there is a contract for the sale of
unascertained goods, property in the goods is not
transferred to the buyer unless and until the
goods are ascertained.-Sec.18.
• Example-An agreement to sell 50 maunds out of
a large quantity of rice in a godown does not
make the buyer the owner of anything. He can
become owner of 50 maunds of rice only after
this quantity of rice has been separated out from
the other rice in the godown.
 a. Transfer of Ownership by Owner
• Intention of the Parties
• In a contract for the sale of specific or
ascertained goods, the property passes at
such time as the parties to the contract intend
it to pass.
 a. Transfer of Ownership by Owner
• Specific goods
• 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.-Sec. 20
 a. Transfer of Ownership by Owner
• Example: On the 4th January, a haystack lying
on the seller's land was sold. It was agreed
that the price was to be paid on' 4th February,
The haystack will remain on the seller's· land
till 1st May and no hay was to be cut till the
price was paid. The haystack was destroyed by
fire. Held, the property in the haystack had
passed on the making of the contract and the
buyer must bear the loss.
 a. Transfer of Ownership by Owner
• When seller has something to do
• Where there is a contract for the sale of
specific goods and the seller is bound to do
something to the goods for the purpose of
putting them into a deliverable state the
property does not pass until such thing is
done and the buyer has notice thereof.-Sec.
21
 a. Transfer of Ownership by Owner
• When goods are to be measured, tested, etc.
• Where there is a contract for the' sale of
specific goods in a deliverable state, but the
seller is bound to weigh, measure, test or do
some other act or thing with reference to the
goods for the purpose of ascertaining the
price, the property does not pass until such
act or thing is done and the buyer has notice
thereof.-Sec. 22.
 a. Transfer of Ownership by Owner
• When goods are to be measured, tested, etc.
• Example: A certain quantity of bark was sold at a
fixed price per ton. It was agreed that for
determining the money payable by the buyer the
bark would be weighed by the agents of the
parties. After a certain quantity was weighed
taken away, the goods was carried away by flood.
Held the buyer is liable to pay for the part taken
away by him and the loss of the remainder must
be borne by the seller.
 a. Transfer of Ownership by Owner
• Unconditional appropriation
• Unconditional appropriation means doing
something which identifies and determines
the actual goods to be delivered. Property
passes when such unconditional appropriation
is made by one party with the consent of the
other.
 a. Transfer of Ownership by Owner
• Example: G sold to P, 140 bags of rice out of his stock
(sale of unascertained goods). After the price was raid
G sent a delivery order for 125 bags and wrote a letter
saying that the remaining 15 bags were ready for
delivery at his warehouse. P sent for the 15 bags after
about a month, when it was discovered that the bags
were stolen. Held, there was unconditional
appropriation of the 15 bags by the seller, there was
implied consent of the buyer to the appropriation
(because he did not object) and therefore property in
the 15 bags has passed to the buyer. He must therefore
bear the loss and is not entitled to get back the price
paid by him for them
 a. Transfer of Ownership by Owner
• Delivery to the carrier
• The general rule is that when the seller
delivers the goods to a carrier for being taken
to the buyer, there is unconditional
appropriation on his part and the property
passes to the buyer. To this rule there is one
exception property does not pass if the seller
reserves the right of disposal of the goods.
 a. Transfer of Ownership by Owner
• Goods sent on approval or on “sale or return"
• 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.
Goods sent on approval or "on sale or
return"
• Examples: (i) K delivered some jewellery to X on sale or
return. X pawned the jewellery with A. Held, X's act
amounts to an acceptance of the sale transaction and
hence the rights A are protected.
• (ii) Certain goods were delivered to A on sale or return. A
delivered the goods to B on similar terms, B to C. and C to
D. D lost the goods. Held, since A was unable to return the
goods to the seller, the sale was complete and must pay the
price.
• (iii) P sends certain books to Q on approval. Q does not
return them or ask the seller to take them away, for six
months. He is deemed to have approved the sale and must
pay the price.