SALE OF GOODS ACT

1930
INTRODUCTION
The sale of goods act 1930 deals with the law relating to sale of
goods. The term GOODS sec-2(7)means any kind of movable
property.
The Sale of goods act 1930 is based on English Sale of GOODS
Act1893.
The presently Act containing 66 section.
DEFINITION
sec-4(1) defines "A contract of sale of goods is a contract
whereby the seller transfers or agree to transfer the property in
goods to a buyer for a price.” It consists of following:
❶ Sale
❷Agreement to sell -sec 4(3)
Essentials of a contract of sale of goods

 Transfer of property. “Property” here means

“Ownership”.

 A mere transfer of possession of goods cannot

be termed as sale
Essentials of a contract of sale of goods

 Two parties. There must be two distinct

parties to a contract of sale, viz., a buyer and a
seller.

 A person cannot buy his own goods.

 There may be a contract of sale between one
“owner” and another.
Essentials of a contract of sale of goods

 Goods. The subject-matter of contract of sale

must be “goods”.

 “Goods” means every kind of movable

property other then actionable claims and
money; and includes stock and shares.

 “Money” means current money.

 Essentials of a contract of sale of goods
1. Two parties
2. The seller should transfer the property in the goods to the buyer
3. The subject matter of the contract is ‘goods’
Sec 2(7) "goods" means every kind of movable property other
than actionable claims and money; and includes stock and
shares, growing crops, grass, and things attached to or forming
part of the land which are agreed to be severed before sale or
under the contract of sale
4. The transfer of property in the goods from seller to the buyer
is for consideration known as price.
5.Includes both sale and agreement to sell
6.No formalities to be observed.
 Essentials of a Contract of Sale of Goods
 “buyer" means a person who buys or agrees to
buy goods.
 "seller" means a person who sells or agrees to
sell goods .
Price. The consideration for a contract of sale
must be money consideration called the
“price”.
 If goods sold or exchanged for the other goods
will governed by Transfer of Property Act not
by Sale of Goods Act.
ESSENTIALS OF A CONTRACT OF SALE OF
GOODS
 Include both Sale & an agreement to sell.

 Sale (immediate transfer of ownership).

 agreement to sell (parties are agree but transfer

of goods will occur in future ).
 Definition
• 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 price".
 General Rule
• The general rule is that only the owner of
goods can transfer a good title. No one can
give a better title than he himself has.

• This rule is expressed by the maxim "Nemo

dat quod non habet" which means "that no one
can give what he himself has not"
 General Rule
• If the seller, therefore, has no title, or a
defective title, the buyer's title will be equally
wanting or defective as the case may be,
though he may be a purchaser - bonafide and
for value.
EXAMPLE
• A finds a ring of B and sells it to a third person
who purchases it for value and in good faith.
The true owner, i.e., B can recover from that
person, for A having no title could pass none
the better.
 Sale of Goods and Other Similar Contracts (P-299)
• Contract for Exchange or Barter
• Currency Transactions
• Contracts for work and Material
• Hire-Purchase
• Construction Contracts
• Bailment
• Contracts of Agency
 Contract for Exchange or Barter
• A contract of exchange of goods for goods is not a
contract of sale, because there is no “money
consideration” or “money price” involved.
• Where goods and money are paid for goods, some say
that the substantial part of the transaction is to be
looked at, for example, if I give my car and money
for a new car to a car company.
• A barter agreement contract is an agreement in which goods
or services are exchanged in lieu of cash and they often
require different contract conditions.
 Currency Transactions
• Sale of money for money is excluded from the
meaning of sale of goods for a similar reason as
“money consideration” is offered from both sides and
there are no goods.
• Fredrick Pollock says: “Accordingly money cannot
be the price of money. The change of a Govt currency
note for money is not a contract of sale, for it
amounts to an exchange of money in one form for
money in another form.
 Contracts for work and Material
• In such contracts, goods are combined with services.
The contracts differ in nature, but most are not
contracts of sale.
• For example, if I buy a suit from a tailor and ask him
to shorten the length of the trousers, this is a contract
of sale although some services are involved.
• If, on the other hand, I give my car for repairs and the
mechanic has to replace several parts while repairing
my car then this is not a contract of sale
 HIRE-PURCHASE

• In such contracts the person hiring the goods, ends up

buying the goods when the last installment is paid.
Here an option is given to the buyer, which means he
may not buy the goods if he does not want to in the
end.
• Thus, title is not transferred till the final amounts are
paid upon exercising the option. If there is an
agreement from the start that the buyer will definitely
buy the goods then it is a sale with installments.
 Construction Contracts
• Buying a house that is already made is not the sale of
goods, but the sale of land.
• Building a house with land owned by the buyer is a
service contract.
Essentials of a contract of sale of goods

No formalities to be observed.

Sale of Good Act does not prescribe any
particular form to constitute a valid contract of
sale.
It is made by mere offer and acceptance.
Offer could be made by either party and
accepted by other.
 Agreement to sell

Agreement to sell
“Where under a contract of sale the transfer of
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
agreement to sell”.
 Sale and Agreement to sell
• Property in the goods is transferred from the
seller to the buyer- sale

• Transfer of the property in the goods is to be

taken place at some future date or after
fulfillment of some condition,
-AGREEMENT TO SALE
 SALE &AGREEMENT TO SELL-DISTINCTION
• 1-Nature of contract
• sale-a sale is an executed contract
Agreement to sell-is an executory contract.

2-Transfer of Property.
Sale-the property in goods passes from seller to
buyer immediately.
Agreement to sell-property in goods passes from
seller to buyer at some future date or subject to
fulfillment of certain condition.
 SALE &AGREEMENT TO SELL-
DISTINCTION
• 3Risk of loss- in a sale if the goods are
destroyed, the risk of loss falls on the buyer
even if the goods were in the possession of
seller.
In agreement to sell if goods are destroyed the
risk of loss falls on a seller even if the goods
were in the possession of buyer.
4)Consequences of the breach
On breach of agreement to sell by the seller, buyer
has only personal remedy against the seller. but if
after a sale the seller breaks the contract the buyer
may sue for delivery of goods or for damages.

In an agreement to sell, if the buyer fails to accept

the goods the seller may sue for the damages only
and not for the price. On a sale ,if the buyer does
not pay the price ,the seller may sue for the price.
 6) Insolvency of the seller
• 6) Insolvency of the seller In the sale ,if the
seller becomes insolvent, the buyer is entitled
to recover the goods from the official receiver
or assignee.
• In an agreement to sell , if the buyer has
already paid the price and the seller becomes
insolvent ,buyer can claim only a ratable
dividend and not the goods.
 7) General and particular property

• 7) General and particular property an

agreement to sell creates a right in personam.
(private right, e.g contractual rights)
a sale creates a right in rem.((public right, e,g,
privacy, reputation, property, life)
 SALE &AGREEMENT TO SELL-DISTINCTION

• 8)Right of re-sales in a sale ,the seller cannot

resell the goods even if he is in possession of
goods after sale.
• In an agreement to sell ,the seller may sell the
goods since ownership is with the seller.
 GOODS AND THEIR CLASSIFICATON
Meaning of goods : section 2(7)
Goods means every kind of movable property
other than actionable claims and money ; and
includes stock and shares ,growing crops , grass,
and things attached to or forming part of the land
which are agreed to be severed before sale and
under the contract of sale .
 ACTIONABLE CLAIM
Is a species of property. Hence capable of ownership and
transfer.
• Sec. 3 of TP Act defines actionable claim to a claim: –
To any debt other than a debt secured by mortgage of
immovable property or by hypothecation or pledge of
movable property – To any beneficial interest in
movables not in possession actual or constructive of the
claimant – Which the Civil Courts recognise as affording
grounds for relief, whether such debt or beneficial interest
be existent, accruing, conditional or contingent.
• “A” owes Rs. 1000 to “B”. “B”’s claim is an actionable
claim. Because, “B” can bring an action in a court and
claim back the amount .
 Classification of Goods
Goods may be divided into 3 types.
• Existing Goods .
• Future Goods .
• Contingent Goods .
 Existing goods : (section 6)

Existing goods are those which are owned or possessed

by the seller at the time of the contract .

Existing goods may be either ;

Specific and Ascertained
Generic and Unascertained
 Specific and Ascertained goods

Specific and Ascertained goods : Section 2 (14)

goods identified and agreed upon at the time a contract
of sale is made .
Generic and Unascertained :
Indicated by description and not separately Identified .
EXAMPLE : sale of one kg of oil from 100 kg of oil with
the merchant is a sale of un-ascertained goods. When one
kg is separated from 100 kg of oil the sale is of specific
goods .
 GOODS AND THEIR CLASSIFICATON
Future goods :section 2(6)
Future goods means goods to be manufactured
or produced or acquired by the seller after
making the contract of sale .
EXAMPLE :
An agreement to sell future crops of a particular
field implies an agreement to sell future goods .
 CONTINGENT GOODS :

Contingent goods are the goods the acquisition of which

by seller depends upon a contingency which may or may
not happen. Contingent goods is a part of future goods .
EXAMPLE :
Where A agrees to sale B a certain painting only if C,
its present owner, sell it to him, A. This painting is
classified as contingent goods .
 CONTRACT HOW MADE S-5
• Section 5: Contract of Sale - how made
• A contract of sale is made by an offer to buy or sell
goods for a price and the acceptance of such price.
• A contract may provide for the immediate delivery of
goods or immediate payment of the price or both, or for
the delivery or payment by instalments. Or that the
delivery of payments or both shall be postponed.
• Subject to the provisions of any law for the time being
enforced, a contract of sale may be in writing or by the
word of mouth or may be impliedly or may be implied
from the conduct of the parties.
 Subject-Matter of Contract S-6
• The goods which form the subject of a contract of
sale must be either existing goods owned or
possessed by the seller, or future goods. There may
be a contract for the sale of Goods the acquisition of
which the seller depends upon contingency which
may or may not happen. S-6
• 1.Goods perishing before making of contract
• When there is a contract for the sale of specific
goods, the contract becomes void if the goods
without the knowledge of the seller have, at the time
when the contract was made, perished or become so
damaged as no longer to answer to their description
in the contract. (S-7)
 Subject-Matter of Contract S-6
• Goods perishing before sale but after agreement to
sale
• When 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. (S-8)
 Price
• It is not essential in a contract of sale that the price
should be fixed at the time of sale. It may be fixed by
the contract or may be left to be fixed in an agreed
manner, or may be determined by the course of
dealing between the parties. In the absence of any
such provision, the buyer is bound to pay a
reasonable price.
 Price
• Price: the consideration for the contract of
sale, called price, must be money. When
goods are exchanged for goods, if is not a sale
but a barter. Partly in money and kind is a
contract of sale.
CONDITIONS AND
WARRANTIES
 CONDITIONS AND WARRANTIES
• Contract are often made up of various statements and
promises on both side, differing in character
importance. The parties may regard some of them as
vital, and others as subsidiary or collateral to the main
purpose of the contract.
• If the parties regard a particular term as essential, it is
a condition; its failure discharges the contract. If they
do not regard it as essential, it is a warranty; its
failure can only give rise to an action for such
damages as may have been sustained by the failure of
that particular term.
 CONDITION
• A ‘condition’ is a stipulation essential to the main
purpose of the contract, the breach of which gives the
aggrieved party a right to repudiate the contract itself
[Sec 12(2)]. In addition, he may maintain an action
for damages for loss suffered, if any, on the footing
that the whole contract is broken and the seller is
guilty of non delivery.
 PROMISORY CONDITION
• Here we are concerned with promissory conditions
and not with contingent conditions. “A promissory
condition is a term of contract under which one party
promises to do a particular thing and his failure to
perform the promised act constitutes a breach of
contract.
• Thus condition is an essential term which goes to the
“root or heart” of the contract.
 WARRANTY

A ‘warranty’ is a stipulation collateral to the

main purpose of the contract, the breach of
which gives the aggrieved party a right to sue
for damages only, and not to avoid the contact
itself.[Sec 12(3)]
 MEANING
Condition forms the very basis of a contract of sale,
the breach of which causes irreparable damage to the
aggrieved party so as to entitle him even to repudiate
the contract whereas

Warranty is only of secondary importance, the breach

of which causes only such damages as can be
compensated for by damages.
 Stipulation- a condition or a warranty ?
 “Whether a stipulation in a contract of sale is a
condition or a warranty depends in each case
on the construction of the contact. A
stipulation may be a condition though called a
warranty in the contract.” [Sec12(4)]
 The court look to the intention of the parties
by referring to the terms of the contract , its
construction and the surrounding
circumstances to judge whether a stipulation is
a condition or a warranty.
 Example
P goes to R , a horse dealer, and says, “I want a horse which can
run at a speed of 30 km/h”. R provides him a horse saying,
“This will suit you”. P buys the horse. Later on P finds that
the horse can run only at a speed of 20 Km/h. There is a
breach of condition, P can repudiate the contract, return the
horse to R and get back the price.
But if P says to R “ I want a horse.” R sells him a horse saying
that it can run at speed of 30Km/h but later P finds that it can
run at a speed of 20Km/h, there is a breach of warranty as
stipulation made by seller was only a subsidiary one. The
seller gave the assurance of speed without being asked by the
buyer.
 CONDITION AND WARRANTY DISTINGUISHED
• As to value – A condition is a stipulation which is
essential to the main purpose of the contract, whereas
a warranty is a stipulation which is collateral to the
main purpose of the contract.[Sec. 12(2)(3)]
• As to the breach – The breach of a condition gives
the aggrieved party the right to repudiate the
contract and also to claim damages , whereas breach
of warranty gives the aggrieved party a right to claim
damages only.
• As to treatment – A breach of condition may be
treated as a breach of warranty but a breach of
warranty cannot be treated as a breach of condition.
 When Breach of Condition is to be treated as
Breach of Warranty
• Voluntary waiver by buyer. Although on a breach of
condition by the seller , the buyer has a right to treat
the contract as repudiated and reject the goods, but he
is not bound to do so.
• He may instead elect to waive the condition that is to
treat the breach of condition as breach of warranty and
accept the goods and sue the seller for damages for
breach of warranty.
 When Breach of Condition is to be treated as Breach of
Warranty
• Acceptance of goods by buyer. Where the buyer has
accepted the goods and subsequently he comes to
know of the breach of condition, he cannot reject
them, but can only maintain an action for damages.
• This case does not depend upon the will of the buyer
but the law compulsorily treats a breach of condition
as a breach of warranty.
 Acceptance of only a part of the goods
• If the buyer has accepted only part of the goods and
contract is indivisible, he will have to treat the breach
of condition as the breach of warranty and accept the
remaining part also.
• But in case of divisible/severable contract, he can
repudiate as regards remaining goods, if he has
accepted only part thereof.
• Indivisible contracts are those where price for a lot,
consisting goods of different qualities, as such is fixed
and not fixed per unit or per bag or per ton, etc.
 Meaning of ‘acceptance’.
According to Sec 42, the buyer is deemed to have accepted the
goods:
1) When he intimates to the seller that he has accepted them; or
2) When he does any act in relation to goods which is
inconsistent with the ownership of the seller; e.g consumes,
uses, pledges or resells the goods or puts his mark on them,
etc; or
3) When, after the lapse of reasonable time, he retains the
goods without intimating the seller that he has rejected them.
On rejection of goods, however , mere informing the seller is
enough and the buyer is not bound to return the rejected goods
actually. [Sec 43]
 Express & Implied Conditions, Warranties
• Condition & warranties may be either express or
implied.
• They are said to be express when at the will of the
parties they are inserted in the contract.
• They are said to be implied when law presumes their
existence in the contract even without their actually
having been put in the contract.
• It is to be noted that the parties by express agreement
can exclude the operation of a condition implied by
law.
 Implied Conditions
• Condition as to title [Sec. 14 (a)].
• Condition in a sale by description [Sec. 15].
• Condition in a sale by sample [Sec.17].
• Condition in a sale by sample as well as by
description [Sec.15].
• Condition as to fitness or quality [Sec.16(1)].
• Condition as to merchantability [Sec.16(2)].
• Condition as to wholesomeness.
 1. CONDITION AS TO TITLE

In a contract of sale, unless the situation of the contract are such

as to show a different intention, there is an implied condition
on part of the seller that—
 In sale, he has right to sell goods, that is, he has a good title
to the goods. If he does not, the consideration fails and
buyer will have the right to recover the price. (Rowland vs
Divall, 1923)
 In agreement to sell, he will have a right to sell the goods at
the time when property is to pass. This mean that he will
show a good title when the actual sale takes place. S-14
 Condition in a Sale By Description

 In sale by description there is an implied condition that the

goods shall correspond with description.
 This means “if you contract to sell peas, you cannot oblige
the party to take beans.”
 Hence if the description of the article tendered is different
then the buyer may not buy the goods. S-15 & 16
 Condition in a Sale By Sample
• A contract of sale is a contract for sale by sample where
there is a term in the contract, express or implied, to that
effect.
1. That bulk shall correspond with the sample in quality.
2. That the buyer shall have a reasonable opportunity of
comparing the bulk with the sample.
3. That the goods shall be free from any defects, rendering
them un-merchantable. S-17
4. The bulk of goods must corresponds with Sample-
5. Buyer to have reasonable opportunity to Examine Goods.
 Condition in a Sale by Description and Sample

• If the sale is by sample as well as by description, it is

not sufficient that the bulk of goods corresponds with
the sample, if the goods do not also correspond with
the description.
• This means goods must match with the description
and sample. S-15
 Condition As To Quality Or Fitness
• Normally, in a contract of sale there is no implied condition as
to quality or fitness for particular purpose.
• The buyer must test the goods before he buys them in order to
satisfy himself that the goods shall be suitable for him.
• The goods must be of a description which it is in the course of
the Seller’s business to supply, there is an implied condition
that the goods shall be reasonably fit for such purposes.
 Condition Of Merchantability

Where goods are bought by description from a seller

who deals in goods of that description there is an
implied condition that the goods are of merchantable
quality.
This means goods should be such that they are
commercially saleable, as per the description by
which they are known in the market at their full
value.
 Condition As To Wholesomeness
• Foodstuff must not only comply with the description,
it must also be wholesome, that is fit for
consumption. This is actually a sub-condition of
merchantability for a particular purpose.
 Implied Warranties
• Warranty of quit possession [Sec.14(b)].
• Warranty of freedom from encumbrances
[Sec.14(c)].
• Warranty of disclosing the dangerous nature of
goods to the ignorant buyer.
 Express and Implied Warranties
• Warranties, like conditions, may also be
express or implied. Implied warranties laid
down by the law. It is important to note that
these implied warranties may be excluded or
change through:
a) Express agreement between the parties;
b) During the course of dealing between them;
c) Through custom or usage of trade;
 Express and Implied Warranties, S-62
• S-62 says: “Where any right, duty or liability would
arise under a contract of sale by implication of law, it
may be negatived or varied by express agreement or
by the course of dealing between the parties, or by
usage, if the usage is such as to bind both parties to
the contract.”
 1.WARRANTY OF QUIET POSSESSION
• In a contract of sale, unless there is a contrary
intention, there is an implied warranty that the buyer
shall have and enjoy quite possession of the goods.

• If the buyer is in any way disturbed in the enjoyment

of the goods in consequence of the seller’s defective
title to sell, he can claim damages from the seller.
 2.Warranty Of Freedom From Encumbrances
• In addition to the previous warranty, the buyer is
entitled to a further warranty that the goods are not
subject to any charge or right in favor of a third party.

• If the possession is in any way disturbed by reason of

the existence of any charge or encumbrances on the
goods in favor of any third party, he shall have a right
to claim damages for breach of this warranty.
 3.Warranty To Disclose Dangerous Nature Of Goods
• When a person sells goods knowing that the goods
are inherently dangerous or they are likely to be
dangerous to the buyer and that the buyer is ignorant
of the danger, he must warn the buyer of the probable
danger, other wise he will be liable in damages.
 Warranty Implied by Usage of Trade
• S-16(3) indicates that a warranty may be implied, as
to quality or fitness for a particular purpose, through
usage of trade.
 Express warranty will not Negative Implied Warranty
• S- 16(4) says that an express warranty does
not negative a warranty implied by the Act
unless inconsistent therewith, that is, unless it
has the effect of altering or negativing the
implied authority.
 DOCTRINE OF CAVEAT EMPTOR

MEANING OF CAVEAT EMPTOR : SECTION 16

Caveat emptor is a Latin term meaning "let the buyer
beware". It is a general rule of law that a purchaser
assumes the risk of his/her purchase. The intent of the rule
is to place a duty of care on the buyer in selecting an item
and putting forth appropriate inquiry before completing the
sale. In this way, a seller is also protected from liability for
buyer's remorse .
EXAMPLE :
you buy a used car which you are told is in perfect
condition, but it immediately breaks down
 CAVEAT EMPTOR
• This means “LET THE BUYER BEWARE” i.e., the
seller is under no duty to reveal unflattering truths
about the goods sold.
• Therefore, when a person buys some goods, be must
examine them thoroughly.

• If the goods turn out to be defective or do not suit his

purpose or he depends upon his own skills and makes
a bad decision, he cannot blame the seller.
 CAVEAT EMPTOR
• The maxim comes into operation when no conditions
or warranties are provided in the contract. Thus, a
contract undertaken in absolute terms used to invoke
this rule. In many modern jurisdictions it has been
held that the rule is not really based on “Fairness”
therefore, its impact has been toned down. S-16
 EXCEPTION OF DOCTRINE OF "CAVET
EMPTOR"
• In case of misrepresentation by the seller :
When a seller makes a misrepresentation and the buyer
relies on that representation .
• In case of sales by description : section 15
When the goods are sold by description and the goods
supplied by the seller do not correspond to the description
.
• In case of sale by sample : section 17
Where the goods are sold by sample and the goods
supplied by the seller do not correspond with the sample.
 CONT(D)
• In case of sale by sample as well as description
section 15
where the goods are sold by sample as well as
description and the goods supplied do not
correspond with sample as well as description .
• Fitness for a particular purpose : section 16 (1)
Where the seller or the manufacture is a dealer of
the type of goods sold by him and the buyer has
disclosed the purpose for which goods are required
and relied upon the seller’s skill or judgment.
 PERFORMANCE OF CONTRACT OF SALE
“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 terms of the contract of sale”.

Apart from the transfer of property in goods from the

seller to the buyer, a contract of sale of goods visualizes
two other important events, the delivery of goods to
buyer and the payment of price to the seller.
 Caveat Venditor Law and Legal Definition
• Caveat Venditor is a Latin term which means let the
seller beware. The person selling goods is
accountable for providing information about the
goods to the seller. It is a counter to caveat emptor
and suggests that sellers can also be deceived in a
market transaction.
• A Latin term meaning “let the seller beware,” in
contrast to the more widely known saying caveat
emptor (let the buyer beware). The principle of caveat
venditor cautions that the seller is responsible for any
problem that the buyer might encounter with a service
or product.
 DELIVERY
• Sec2(2) defines delivery of goods as “voluntary transfer
of possession from one person to another.” any forced
transfer of possession will not amount to delivery of
goods.
• MODES OF DELIVERY:-
Delivery of goods can be allowed to take place by doing
anything which the parties agree to be taken as delivery
or which has the effect of putting the goods in the
possession of the buyer of his agent. It can be:-
1) Actual
2) constructive
 RULES AS TO DELIVERY OF GOODS

• Delivery may be actual or constructive:- “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 person authorised to hold them on his
behalf”.
 DELIVERY
• It has been defined as a voluntary transfer of possession from
one person to another..
• Delivery of the goods may, be:
• I. Physical or Actual Delivery
• 2. Symbolic Delivery - e.g., delivery of a railway receipt
properly endorsed, or delivery of the key of a warehouse;
• 3. Constructive Delivery or only an acknowledgement by the
person in possession that he holds them on behalf of another.
 Rules regarding delivery
• The seller is not bound to deliver goods till the buyer
applies for delivery in terms of the contract.
• Place of Delivery - goods sold are to be delivered at
the place agreed for delivery in the contract.
• Time of Delivery – as per contract otherwise within
reasonable time.
• The expenses of and incidental to putting the goods
into a deliverable state shall be borne by the seller, as
per the terms of the contact. Demand and tender must
be at a reasonable hour - What is a reasonable hour is
a question of fact.
 Rules regarding delivery
• Delivery of Wrong Quantity - Where the seller
delivers to the buyer a quantity of goods less than he
contracted to sell, the buyer may reject them. But, if
the buyer accepts the goods so delivered he shall be
required to pay for them at the contracted rate.
• Instalment Deliveries - The buyer is not bound to
accept delivery by instalment, unless otherwise
agreed.
 Rules regarding delivery
• Delivery to the Carrier - Delivery of goods by the
seller to a carrier for transmission to buyer for safe
custody is prima facie deemed to be a delivery of the
goods to the buyer.
• As regards insurance, the seller’s duty is only to give
sufficient notice to the buyer to enable him to insure
the goods.
• Buyer not bound to return rejected goods –
• when the goods are delivered to a buyer on sale or
return basis and the buyer refuses to accept them, he
is not bound to return them to the seller, but it is his
duty to inform the seller that he has refused them;
otherwise after lapse of a reasonable time, he will be
deemed to have accepted them.
 RULES AS TO DELIVERY OF GOODS
• It is the duty of seller to deliver the goods and of the
buyer to accept and pay for them in accordance with
the terms of contract of sale.
• Payment of Price and Delivery are, therefore,
Concurrent Condition: Unless otherwise agreed,
delivery of goods and payment of price are
concurrent conditions, that is to say, the seller must
be ready and willing to give possession of the goods
to the buyer in exchange for the price, and the buyer
must be ready and willing to pay the price in
exchange, for possession of the goods. Sec 31 and 32.
 RULES AS TO DELIVERY OF GOODS
• Buyer should apply for delivery:- Apart from any
express contract, the seller of goods is not bound to
deliver them until the buyer applies for delivery. Sec-
35
• Place of delivery:- According to sec 36(1), unless
otherwise stated in the contract, the place of delivery
shall be determined.
• Time of delivery:- According to section 36(2), if the
seller is bound to send the goods to the buyer, but no
time fixed, the seller is bound to send them within a
reasonable time.
 RULES AS TO DELIVERY OF GOODS
• Goods in possession of third person- According to
sec 36(3), where the goods at the time of sale are in
the possession of a third person, there is no delivery
by the seller to the buyer unless and until such third
person acknowledges to the buyer that he holds the
goods on his behalf and requires the consent of all
three parties.
• Expenses of delivery:- According to
sec36(2),”Unless otherwise agreed, the expenses of
and incidental to putting the goods into a deliverable
state shall be borne by seller”.
 RULES AS TO DELIVERY OF GOODS
• Mode of delivery
• The mode of delivery, that is, whether the seller is to
send the goods to the buyer or the buyer is to take
possession of them, depends on the contract between
the parties, which may be express or implied. In the
absence of any such contract, the mode of delivery
may be governed by the usage of trade.
 RULES AS TO DELIVERY OF GOODS
• Delivery of wrong quantity(sec.37,considered three
possibilities)they are;
a) Excess delivery
b) Short delivery
c) Mixed goods
The issue of wrong delivery are subject to any usage of
trade, special agreement or course of dealing
between the parties, but.
The buyer has also the option of accepting so much of
the goods as he had contracted for or so much of the
goods as tally with the description. S-37
 DELIVERY OF WRONG QUANTITY (sec.37)

• S-37 lays down some guidelines for acceptance or

rejection. In general,
• where the quantity is less the buyer may reject the
goods, but if he accepts them he is to pay at the
contract rate.
• If excess quantity is delivered he may accepts where
goods can be separated; if not he may reject them.
• The same applies to goods delivered mixed with other
goods.
 INSTALLMENT DELIVERIES
• There is no obligation to accept Installment
deliveries, unless agreed.
• Installment deliveries:- Should the entire goods
be delivered to buyer as one lot or should they
be delivered in installments .
Sec 38(1) states that “unless otherwise agreed
the buyer of goods is not bound to accept
delivery thereof by installments.”
 ACCEPTANCE OF DELIVERY BY BUYER

• The buyer is not deemed to have accepted the goods

until he is given a reasonable opportunity of
examining them.
• When he intimates the seller of his acceptance, or
does with reference to the goods any act which is
inconsistent with ownership of the seller or does not
reject them within reasonable time, such action
amounts to acceptance of goods.
 ACCEPTANCE OF DELIVERY BY BUYER

Mere receipt of goods is not acceptance-

• Even after the buyer has taken possession of
the goods delivered by the seller, he may not
have accepted the delivery.
• Sec 42 indicates when would the delivery be
deemed to be accepted by the buyer.
Buyer’s right of examination:-
• Before acceptance of goods, the buyer has a
right to their inspection .He may exercise this
right or not is his discretion.

No duty to return the rejected goods:-

if the buyer has decided to reject the goods, he
need to only inform the seller and do nothing
more.
Wrongful refusal to take delivery by buyer:-
• When the seller is ready and willing to deliver
the goods and request the buyer to take
delivery, and the buyer does not within a
reasonable time after such request take
delivery of goods, he is liable to the seller for
any loss occasioned by his neglect or refusal
to take delivery.
 UNPAID SELLER AND HIS RIGHTS
• Sec-45, “Unpaid Seller” defined – The seller
of goods is deemed to be an “unpaid seller”
(a) when the whole of the price has not been paid
or tendered;

(b)when a bill of exchange or other negotiable

instrument is dishonored (due to non-
fulfillment of condition).
 Bill of Exchange
• A bill of exchange is a written order binding one party to pay
a fixed sum of money to another party on demand or at some
point in the future.
• A bill of exchange is a binding agreement by one party to pay
a fixed amount of cash to another party as of a predetermined
date or on demand. There are three entities that may be
involved with a bill of exchange transaction. They are as
follows:
• Drawee. This party pays the amount stated on the bill of
exchange to the payee.
• Drawer. This party requires the drawee to pay a third party
(or the drawer can be paid by the drawee).
• Payee. This party is paid the amount specified on the bill of
exchange by the drawee.
 Negotiable Instruments
• “Negotiable” means transferable by delivery and
• “Instrument” means a written document by which a
right is created in favor of some person.  Thus,
negotiable instrument means a document which is
transferable by delivery.
• A Negotiable Instrument is that document that
includes a ‘promise to pay’ a certain amount of
money to the bearer of the document. Its a mode of
transferring a debt from one person to another.
Negotiable Instruments are always in written form.
 UNPAID SELLER
• The seller who has not received price of goods
sold or the seller who has got his negotiable
instrument dishonored will become Unpaid
Seller. Sale of Goods Act, 1930 Section 45 to
55 read about the rights of Unpaid Seller. 
 UNPAID SELLER AND HIS RIGHTS
• The seller of goods is entitled to payment of price at
the same time as he delivers the goods unless
otherwise agreed. S-32
• If the buyer fails to pay, the seller can always sue for
the price.
• The seller is also entitled to compensation if the
buyer refuses to accept delivery of the goods sold. Se-
56
• And he is also entitled to a reasonable rate of interest
on the total price of the goods sold from the time it
was due. Sec-61
 RIGHTS AGAINST THE GOODS
• According to sec-45, an unpaid seller is one
who has not been paid the whole of price, or
one who receives bill of exchange or cheque
etc (as conditional payment) which is
subsequently dishonored.
• The term Seller includes any person who is in
the position of Seller, an agent of seller.
 RIGHTS AGAINST THE GOODS
• A seller, who has transferred the property in the
goods to the buyer, has the following rights against
the goods, when the price is not wholly or partly paid
by the buyer.
 A lien on the goods while the goods are still in his
possession;
 A right of stopping the goods in transit after he has
parted with the possession of the goods;
 RIGHTS AGAINST THE GOODS

• A right of resale;
• Where, however, the property in the goods has
not passed to the buyer, the unpaid seller has,
in addition to his other remedies, a right of
withholding delivery similar to and con-
extensive with his right of lien and stoppage in
transit where the property has passed to the
buyer. Sec-46
 RIGHTS OF UNPAID SELLER
 Rights of unpaid seller against the goods.
1) Right of lien
2) Right of stoppage of goods in transit
3) Right of resale

 Rights of unpaid seller against the buyer

personally
1) Suit for price
2) Suit for damages for non acceptance
3) Suit for special damages and interest
 Unpaid Seller’s Lien and its Termination
Right of lien
‘Lien’ is the right to retain possession of goods and refuse
to deliver them to the buyer until the price due in respect
of them is paid or tendered.
An unpaid seller in possession of goods sold is entitled to
exercise his lien on the goods in the following cases:
(a) where the goods have been sold without any stipulation
as to credit;
(b) where the goods have been sold on credit, but the term
of credit has expired.
(c) Where the buyer has become insolvent.
 STOPPAGE IN TRANSIT

• The right of stoppage in transit means the right of

stopping further transit of the goods while they are
with a carrier for the purpose of transmission to the
buyer
• If an unpaid seller hears of the insolvency of the
buyer after he has parted with the possession of
goods, he can stop the goods in the course of transit
and resume and retain possession of them until
payment or tender of the price.
• This right of unpaid seller is known as the right of
stoppage in transit. Sec-50
 WHEN SELLER HAS MADE PART DELIVERY

• Where an unpaid seller has made part delivery

of the goods, he may exercise his right of lien
on the remainder, unless such part delivery has
been made under such circumstance as to
show an agreement to waive lien.
 TERMINATION OF LIEN
The unpaid seller of goods loses his lien thereon-
(a) When he delivers the goods to a carrier or other
bailee for the purpose of transmission to the buyer
without reserving the right of disposal of the goods;
or
(b) when the buyer or his agent lawfully obtains
possession of the goods; or
(c) When the seller expressly or impliedly waives his
right of lien.
 When the right be exercised?
(a) The buyer becomes insolvent.
(b) The property has not passed to the buyer.
(c) The goods are in the course of transit.
 Duration of transit
Goods are deemed to be in course of transit till
they are not transit to the buyer or his agent,
no matter whether they are lying at the
destination with the carrier awaiting
transmission or are in actual transit.
 Duration of transit
• The transit deemed to be at an end and the seller
cannot exercise his right of stoppage in the following
cases:
(a) When the buyer or his agent takes delivery after the
goods have reached destination.
(b) If the buyer or his agent obtains delivery of goods
before their arrival at the appointed destination, the
transit is at an end.
(c) When the goods have arrived at their destination and
the carrier acknowledge to the buyer or his agent
that he holds the goods on his behalf.
 Duration of transit
(d) If the goods are rejected by the buyer and the carrier
or other bailee continues in possession of them, the
transit is not at an end, even if the seller has refused
to receive them back.
(e) Where the goods are delivered to a ship chartered by
the buyer, the master of the ship may be acting as a
carrier or as agent of the buyer according to the
circumstances of a particular case.
(f) Where the carrier or other bailee wrongfully refuses
to deliver the goods to the buyer or his agent, the
transit is at an end.
 Duration of transit
• Note: The use of the words “carrier or other bailee”
makes it clear that the word ‘transit’ does not
necessarily mean that the goods should be in motion
all the time; goods continues to be in transit even
when they are deposited with a bailee at any place in
the course of transmission to the buyer.
 How stoppage in Transit is effected? Sec-52

• The unpaid seller may exercise his right of

stoppage in transit either:
 By actual possession of the goods, or
 By giving notice of his claim to the carrier of
other bailee in whose possession the goods
are.
 RIGHT OF RESALE
Section 54, gives to unpaid seller a limited right to resell the
goods in following cases:
(Right of lien, retain possession and stoppage of goods in
transit)

I. Where goods are of a perishable nature; or

II. Where such a right is expressly reserved in the contract in

case the buyer should make a default; or

III. Where the seller has given a notice to buyer of his intention
to resale and buyer dose not pay or tender the price within a
reasonable time.
 In resale if there is any loss, it will recovered
by defaulting buyer but if there is any surplus,
seller can keep it with him.

 If, however no notice of resale is given to

buyer, the rights of claiming loss of surplus, if
any, is reversed.
REMEDIES AVAILABLE TO BUYER AND SELLER
OF GOODS FOR BREACH OF CONTRACT
REMEDIES AVAILABLE TO SELLER
In addition to rights against goods, seller has following
three rights against buyer personally.
1. Suit for price [Sec 55]: Seller can file a suit for
price if buyer wrongly neglects or refuse to pay after
the contract of sale of goods. Irrespective to either
goods are delivered or not.
 Normally happens when goods have been
manufactured to some special orders.
 REMEDIES AVAILABLE TO SELLER

(2) Suit for damages for non-acceptance [Sec. 56]

Where the buyer wrongfully neglects or refuses to accept
and pay for the goods, the seller may sue him for
damages or non acceptance. The seller’s remedy in this
case is a suit for damages rather than an action for the full
price of the goods.
(3)Suit for special damages & interest [Sec. 61]
This section entitles the seller to sue the buyer for ‘special
damages’ also for such loss “which the parties knew,
when they are made the contract, to be likely to result
from the breach of it”.
 REMEDIES AVAILABLE TO BUYER
• Damages for non-delivery
• 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. S-
57
• In a suit for damages by the buyer against the
seller for non-delivery of the goods, the measure
of damages is the estimated loss naturally
resulting from the breach of contract.
 REMEDIES AVAILABLE TO BUYER
• Suit for Specific Performance
• The buyer may sue the seller for specific performance
of the contract to sell. Specific performance can be
demanded only when the goods are specific or
ascertained.
• The remedy is discretionary and will be granted only
• (i) when damages would be an adequate remedy, or
• (ii) When the goods are of a special value or they are
unique. Sec-58
 REMEDIES AVAILABLE TO BUYER
• Remedy for breach of warranty:
• When there is a breach of warranty by the seller, or
when the buyer elects or is compelled to treat any
breach of a condition on the part of the seller as a
breach of warranty, the buyer is not entitled to rejects
the goods, but he may-
• a) set up against the seller the breach of warranty in
diminution or extinction of the price, or
• b) sue the seller for damages for breach of warranty.
Sec-59
 C.I.F & F.O.B contracts Sec-39
• A , C.I.F contract is one for the sale of goods
to be carried by sea, the price including the
cost of goods, the insurance premium and the
freight. It is the duty of seller, therefore, to see
that the goods are properly insured to their
contractual destination.
 C.I.F & F.O.B contracts Sec-39
• An F.O.B contract similarly relates to goods
carried by sea, but the seller’s obligation
terminate when the goods are put on board.
The buyer must arrange for the sea carriage
and the insurance from the time of shipment.
• By Sec-39, the seller is however bound to give
such notice to the buyer as will enable him to
insure the goods during the sea transit, and if
the seller fails to do so, the goods shall be
deemed to be at his risk during such sea
transit.
• RULES GOVERNING TRANSFER OF
PROPERTY/OWNERSHIP BETWEEN
SELLER AND BUYER
 Transfer of Property in Goods
• The property in the goods is said, to be transferred
from the seller to the buyer when the later acquires
the proprietary rights over the goods and the
obligations linked thereto. 'Property in Goods' which
means the ownership of goods, is different from '
possession of goods' which means the physical
custody or control of the goods.
• The transfer of property in the goods from the seller
to the buyer is the essence of a contract of sale.
Therefore the moment when the property in goods
passes from the seller to the buyer is significant for
following reasons:
 Transfer of Property in Goods
• Ownership -- The moment the property in goods passes,
the seller ceases to be their owner and the buyer acquires
the ownership. The buyer can exercise the proprietary
rights over the goods. For example, the buyer may sue
the seller for non-delivery of the goods or when the seller
has resold the goods, etc.
• Risk follows ownership -- The general rule is that the
risk follows the ownership, irrespective of whether the
delivery has been made or not. If the goods are damaged
or destroyed, the loss shall be borne by the person who
was the owner of the goods at the time of damage or
destruction. Thus the risk of loss prima facie is in the
person in whom the property is.
 Transfer of Property in Goods
• Action Against Third parties -- When the goods are in
any way damaged or destroyed by the action of third
parties, it is only the owner of the goods who can take
action against them.
• Suit for Price - The seller can sue the buyer for the
price, unless otherwise agreed, only after the gods have
become the property of the buyer.
• Insolvency - In the event of insolvency of either the
seller or the buyer, the question whether the goods can
be taken over by the Official Receiver or Assignee, will
depend on whether the property in goods is with the
party who has become insolvent.
 Transfer of Property in Goods
• Essentials for Transfer of Property -- The two essentials
requirements for transfer of property in the goods are:
• Goods must be ascertained: Unless the goods are
ascertained, they (or the property therein) cannot pass from the
seller to the buyer. Thus, where there is 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
• Intention to PASS Property in Goods must be there: In a
sale of specific or ascertained goods the property in them is
transferred to the buyer at such time as the parties to the
contract intend it to be regard shall be had to the terms of the
contract, the conduct of the parties and the circumstances of
the case.
 SALE OF GOODS AND PASSING OF PROPERTY
• The issue of passing of property in the goods is perhaps
the most important in the sale of goods. When goods
are sold they pass from the hands of seller to those of
the buyer and the price is paid to the seller. In this
transfer, the goods have a different in different stages.
• The main purpose of the contract of sale is to transfer
the goods to the buyer, that is, transfer the ownership in
the goods or the title to the goods to the buyer who has
paid for those goods. The precise moment at which
property passes is important for the following reasons.
 RISK PASSES WITH OWNERSHIP
• It is a well known rule that “risk passes with
ownership”. The meaning of risk here is the
loss of the goods during the process of sale.
Here possession of goods is not the
determining factor, it is the fact of ownership.
• Goods may be in the possession of the owner
when they are destroyed, but if property in the
goods had passed to the buyer, it is the buyer
who will bear the loss of goods and the seller
will be entitled to the price.
 RISK PASSES WITH OWNERSHIP

• Sec-26, “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 the
buyer’s risk whether delivery has been made or not.”
 OWNER HAS RIGHT OF ACTION
• If the safety of the goods or entitlement to the goods
is threatened by action of third-parties, it is the owner
who can bring about legal action for the securing of
the goods or preventing them from acquisition.
• It may happen that during the process of sale either
the buyer or the seller may become insolvent. In such
situations, the issue arises whether the goods will be
delivered to the official assignee or the official
receiver. The response will depend upon who owns
the goods.
 GENERAL RULES FOR THE PASSING OF PROPERTY

• Goods were divided into existing goods and

future goods, ascertained and unascertained
goods, goods in deliverable state and non-
deliverable state and so on.
• The main purpose of that study was to see exactly
when ownership in the goods is transferred. It
was stated that the transfer of ownership depends
upon the state in which the goods are at the time
of the contract. The rule for such transfer revolve
around the state of goods.
 UNASCERTAINED GOODS
• The meaning of unascertained goods has
already been explained. In simple words,
unascertained goods are those that have
• (i) not been precisely identified at the time of
the contract or (ii) they may be future goods.
• Sec-18 says; “Where there is 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.”
 UNASCERTAINED GOODS; Two rules
• 1. An agreement for the sale of unascertained goods including
future goods, is not a complete sale; it is an agreement to sell.
Property cannot pass through an agreement to sell as it is a
mere promise.
• 2. The appropriation which means a positive act that identifies
the goods or puts them in a state that makes them specific or
ascertained.
• In other words, goods that were existing unascertained goods
or were future goods sold by description will become
ascertained when they are turned into a deliverable state and
appropriated to the contract.
 ASCERTAINED GOODS

• In case of specific or ascertained goods,

 the intention of the parties is the test,
 regard being had to the terms of the contract,
 the conduct of the parties and
 the circumstances of the case.
 Property Passes when the Parties Intend it to Pass
• Sec-19(1) says that; “Where there is a contract
for the sale of specific or ascertained goods the
property in them transferred to the buyer at such
time as the parties to the contract intends it to be
transferred.
• Thus, the transfer of property in ascertained
goods will depend upon the intention of the
parties. To determine such intention of the parties
“regard shall be had to the terms of the contract,
the conduct of the parties and the circumstance of
the case.”
 Implied sub-rules for determining Intention of Parties
• If the parties have spelled out the manner in
which property is to pass, that is, they have
declared their intention, then this directive is to
be followed. If there is no such intention then
the rule laid down in Sec 20 to 24 shall be
followed, and the intention will be implied by
these rules.
 When there is an Unconditional Contract for Goods in a
Deliverable state, property will pass immediately

• Sec 20 states the sub-rule that; “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.” Thus, the
implied intention is that the parties want the goods to
pass immediately.
 Seller cannot give to the buyer a better title than he himself has

• The two Latin maxims,

• Nemo dat qui non habet (no one gives who does not
have), and,
• Nemo dat quod non habet (no one gives what he does
not have), imply that no one can transfer to another
what he does not have himself.
• In other words, no one gives to another a better title
that he himself has. The word “title” literally means
the union of all the elements (ownership, possession)
constituting the legal right to dispose of property.
 Seller cannot give to the buyer a better title than he
himself has
Sec-27 recognizes this rule when it says: “Where
goods are sold by a person who is not the owner
thereof and who does not sell them under the
authority or with the consent of the owner, the
buyer acquires no better title to the goods than
seller had, unless the owner of the goods is by
his conduct precluded form denying the seller’s
authority to sell.”
 EXCEPTIONS TO GENERAL RULE

• Sec 27 to 30, record exceptions to the general

rule. A few exceptions are also found in the
general law;
• Sale by Mercantile agent and Sale under
Implied authority of owner:
• When a buyer has no notice that a mercantile
agent (factor, broker, auctioneer) had an
imperfect title to sell, a bona fide purchase made
from such an agent will give a good title to the
goods to the buyer.
 EXCEPTIONS TO GENERAL RULE
• Sale by Joint owner;
• According to Sec-28, if one of several joint
owners of goods has the sole possession of the
goods by permission of the co-owners, the
property in the goods is transferred to any
person who buys them in good faith and
without notice that the seller does not have
authority to sell.
• AUCTION SALE [SECTION 64] P-
88
 Auction Sale

• We have all come across an auction at some

time. Auctions have certain distinct
characteristics like the bidding process, the
hammer, the whole setting is quite interesting.
Did you know that such auction sale is
covered under the Sale of Goods Act? Let us
have a look at the rules of an auction sale.
 Auction Sale
• An auction sale is a public sale. The goods are sold to all
members of the public at large who are assembled in one
place for the auction. Such interested buyers are the
bidders.
• The price they are offering for the goods is the bid. And
the goods will be sold to the bidder with the highest bid.
• The person carrying out the auction sale is the
auctioneer. He is the agent of the seller. So all the rules
of the law of agency apply to him.
• But if an auctioneer wishes to sell his own property as
the principal he can do so. And he need not disclose this
fact, it is not a requirement under the law.
 AUCTION SALE [SECTION 64] P-88
• Auction sale means a public sale where intending buyer assemble at
one place and offer the price at which they are ready to buy the
goods. The offer of the price if known as 'bid' and the person
making the bid is known as the 'bidder.' The owner of the goods
may himself sell them by auction or appoint a person to sell the
goods by auction on his behalf.
• The person so appointed is known as 'auctioneer.' The relationship
between the owner of the goods and the auctioneer is that of the
principal and agent. In an auction the goods are sold to the highest
bidder. It may be noted that an advertisement to sell the goods by
auction is simply an invitation to the public to make offers and not
an offer to sell. That is why the intending buyers have no right to
sue the auctioneer if auctioneer cancels or postpones the sale by
auction.
 Rules of an Auction Sale
• As we saw previously, the rules regarding an auction sale are found
in the Sale of Goods. Section 64 of the Act specifically deals with
the rules governing an auction sale. Let us take a brief look.
• 1] Goods Sold in Lots
• In an auction sale, there can be many goods up for sale of many
kinds. If some particular goods are put up for sale in a lot, then each
such lot will be considered a separate subject of a separate
contract of sale. So each lot will prima facie be the subject of its
own contract of sale.
• 2] Completion of Sale
• The sale is complete when the auctioneer says it is complete. This
can be done by auctions also – like the falling of the hammer, or any
such customary action. Till the auctioneer does not announce the
completion of the sale the prospective buyers can keep bidding.
 Rules of an Auction Sale
• 3-Seller may Reserve Right to Bid
• The seller may reserve his right to bid. To do so he must
expressly reserve such right to bid. In this case, the seller
on any person on his behalf can bid at the auction.
• 4] Sale Not Notified
• If the seller has not notified of his right to bid he may not
do so under any circumstances. Then neither the seller nor
any person on his behalf can bid at the auction. If done
then it will be unlawful.
• The auctioneer also cannot accept such bids from the
seller or any other person on his behalf. And any sale that
contravenes this rule is to be treated as fraudulent by the
buyer.
 Rules of an Auction Sale
• 5] Reserve Price
• An auction sale may be subject to a reserve price or an upset price.
This means the auctioneer will not sell the goods for any
price below the said reserve price.
• 6] Pretend Bidding
• But if the seller or any other person appointed by him employs
pretend bidding to raise the price of the goods, the sale is voidable
at the option of the buyer. That means the buyer can choose to
honor the contract or he can choose to void it.
• 7] No Credit
• The auctioneer cannot sell the goods on credit as per his wishes.
He cannot accept a bill of exchange either unless the seller is
expressly fine with it.
 Rules Regarding Sale by Auction [Section 64]
• The various rules regarding sale by auction are given as follows:
• Where goods are put up for sale in lots, each lot is prima facie
deemed to be the subject of a separate contract of sale [Seeds
64(1)].
• A sale is complete when the auctioneer announces its completion
by the fall of the hammer or in other customary manner. For
example, by saying one, two and three, Of by shouting going.
going, grim etc [Section 64(2)].
• Until the announcement of completion of sale is made, any bidder
may withdraw his bid [Section 64(2)].
• A right to bid may be reserved expressly by or on behalf of the
seller and, where such right is expressly so reserved, the seller or
anyone person on his behalf may bid at the auction [Section 64(3)].
 Rules Regarding Sale by Auction [Section 64]
• Where a 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 the rule may be treated as fraudulent by the
buyer [Section 64(4)].
• A sale may be notified to be subject to a reserve or upset price
[Section 64(5)]. The term 'reserve' or 'upset' price may be defined
as the minimum price below which the auctioneer will not sell the
goods put up for auction sale.
• If a seller makes use of pretended bidding to raise the price, the
sale is voidable at the option of the buyer [Section 64(6)].
 Notes
• An auctioneer can refuse to accept even the highest bid because
'bid' is only an offer which may or may not be accepted by the
auctioneer.
• An agreement between the bidders not to bid against each other is
called the knock-out agreement. Under such agreement, it is
agreed that only one person will bid and anything obtained by him
shall be shared by all privately. Such agreements are lawful unless
the intention of the parties to the agreement is to defraud a third
party.
• Restraining, which is intended to discourage the bidders from
bidding is an unlawful act.
• Puffers (also known as By-bidders or White Bonnets or Decoy
Ducks) are persons who are appointed by the seller for the
purpose of raising the price. The seller can appoint only one
puffer.
 Notes

• Example At an auction sale, C made the highest bid for

an article of P. State the legal position in each of the
following alternative cases:
• Case (a) If C withdrew the bid before the fall of the
hammer though he knew that one of the condition of the
sale was bid once made cannot be withdrawn'.
• Case (b) If P refused to accept the highest bid. The sale
was not notified subject to a reserve price.
• Case (c) If P appointed two persons A and B, to bid on
his behalf. The sale was notified subject to a right to bid.
 Solution:
• Case (a): C’s bid was an offer to buy and he was entitled to
withdraw his bid before the sale is completed as per express
provision of Section 64(2) (Payne v. Cara Such a condition in an
auction sale was inoperative because it was against the provisions
of the law. [Champa Lal v. Jaigopal]
• Case (b): C's bid was an offer to buy which may or may not be
accepted by the auctioneer. Hence, P could refuse to accept the
highest bid. [Fenwick v. Macdonald]
• Case (c): It amounts to fraud and sale is voidable at the option of
the buyer because the seller could appoint only one person to bid
on his behalf. [Section 64(3) and Section 64(6)]. Here intention of
the seller was not to protect his interest but to raise the price.
[Thornett v. Bathes]
 Notes

• Case (d) If C was allowed to take it away on (i) giving a

cheque for the price (ii) signing an agreement that
ownership should not pass to him until the cheque was
cleared. The cheque was dishonoured but In the
meantime C sold the article to Z.
• Case (e) If the sale was notified subject to a reserve
price and the auctioneer by mistake accepted the C’s
highest bid (which was lower than the reserve price) by
striking the hammer. Later, auctioneer refused to deliver
the goods
 Solution:

• Case (d): Z had a good title because the property

passed to Con the fall of the hammer (Domani v.
Skinner]. The ownership of specific goods in a
deliverable state passes on the completion of contract
of sale.
• Case (e): The sale was not valid and C was not entitled
to goods. It was held that the auctioneer could not
effectively accept such a bid (which was lower than
reserve price) because he could not make a contract so
as to bind his principal to accept less than the reserve
price. [Mows v. Fortesque]
 Liabilities of an Auctioneer
• On the basis of various decisions taken by the court, it
can be said that an auctioneer is liable for damages in
the following cases:
• If the auctioneer had no authority to sell the goods.
[Anderson v. Creall & Sons Led. ]
• If there is a defect in principal's title. [Benton v.
Cowbell Parker & Co.]
• If the auctioneer refuses to give the possession on the
payment of the price.
• If the buyer's possession is disturbed by his principal or
himself.
EXCEPTIONS TO GENERAL RULE
EXCEPTIONS TO GENERAL RULE