SALE OF GOODS ACT, 1930

SALE OF GOODS ACT, 1930
This study note includes
• Sales of Goods Act’1930-Concepts and Definitions
• Condition and Warranty
• Passing of the Property from the Seller to the Buyer
• Performance of the Contract of Sale
• Rights of an Unpaid Seller
• Breach of Contract to deliver Specific or Ascertained Goods
2.1. SALES OF GOODS ACT,1930 - CONCEPTS AND DEFINITIONS
INTRODUCTION
In trade and commerce, sales and purchase of goods are very common transactions. These
transactions may appear to be very simple but the possibilities of complications is always
there. Therefore knowledge of basic principles of sale and purchase is very much essential for
all the concerned parties as well as for the entire community.
The Sale of Goods Act contains the basic principles as well as the legal framework of transactions
of sale and purchase.
Earlier the Sale of Goods Act was a part of the Indian Contract Act. A separate Act was framed
in the year 1930
EXTENT
It extends to the whole of India (except the State of Jammu and Kashmir).
It shall come into force on the 1st day of July, 1930.
BASIC CONCEPTS
(1) ‘Buyer” means a person, who buys or agrees to buy goods,
(2) “Delivery” means voluntary transfer of possession from one person to another.
(3) “Sale” means transfer of property in goods for a price.
(4) “Hire – Purchase Agreement” means the seller delivers the possession of thegoods to the
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other person and he charges rent for the goods. After receiving the price of the goods, the
ownership of the goods is passed on to the purchaser
(5) “Barter exchange” means exchange of goods for goods.
(6) “Bailment” means only the possession is transferred from the bailor to the bai lee. Such
transactions may be for the purpose of keeping the goods in the safe custody or may be for
furnishing security.
SALE AND AGREEMENT TO SELL
(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer
the property in goods to the buyer for a price. There may be a con tract of sale between one
part-owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods in transferred from the seller to
the buyer, the contract is called a sale, but where the transfer of the property in the goods
is to take place at a future time or subject to some condition thereafter to be fulfilled, the
contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled
subject to which the property in the goods is to be transferred.
CONTRACT OF SALE
(1) A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of
such offer. The contract may provide for the immediate delivery of the goods or immediate
payment of the price or both, or for the delivery or pay ment by installments, or that
the delivery or payment or both shall be postponed.
(2) Subject to the provisions of any law for the time being in force, a contract of sale may be
made in writing or by word of mouth, or partly in writing and partly by word of mouth or
may be implied from the conduct of the parties.
EXISTING OR FUTURE GOODS
(1) The goods which form the subject of a contract of sale may be either existing goods, owned
or possessed by the seller, or future goods.
(2) There may be a contract for the sale of goods the acquisition of which by the seller depends
upon a contingency which may or may not happen.
(3) Where by a contract of sale the seller purports to effect a present sale of future goods, the
contract operates as an agreement to sell the goods.
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GOODS PERISHING BEFORE MAKING OF CONTRACT
Where there is a contract for the sale of specific goods, the contract is void if the goods without
the knowledge of the seller have, at the time when the contract was made, perished or become
so damaged as no longer to answer to their description in the contract.
GOODS PERISHING BEFORE SALE BUT AFTER AGREEMENT TO SELL
Where there is an agreement to sell specific goods, and subsequently the goods without any
fault on the part of the seller or buyer perish or become so damaged as no longer to answer to
their description in the agreement before the risk passes to the buyer, the agreement is thereby
avoided.
ASCERTAINMENT OF PRICE
(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in
manner thereby agreed or may be determined by the course of dealing between the
parties.
(2) Where the price is not determined in accordance with the foregoing provisions, the buyer
shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent
on the circumstances of each particular case.
AGREEMENT TO SELL AT VALUATION
(1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the
valuation of a third party and such third party cannot or does not make such valuation,
the agreement is thereby avoided :
Provided that, if the goods or any part thereof have been delivered to, and appro priated
by, the buyer, he shall pay a reasonable price therefor.
(2) Where such third party is prevented from making the valuation by the fault of the seller or
buyer, the party not in fault may maintain a suit for damages against the party in fault.
STIPULATIONS AS TO TIME
Unless a different intention appears from the terms of the contract, stipulations as to time of
payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation
as to time is of the essence of the contract or not depends on the terms of the contract.
2.2. CONDITION AND WARRANTY
INTRODUCTION
It is quite customary in a contract of sale that the seller makes certain statements to influence
the buyer and motivate him to buy the goods. The question which arises here is that whether
the statements made by the seller forms the part of the contract of sale or not?
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If they do form the part of the contract and if there is a difference between the actual goods and
the goods described in the statement, whether the buyer can treat that as a breach of contract?
The legal position is discussed below,
CONDITION AND WARRANTY
(1) A stipulation in a contract of sale with reference to goods which are the subject thereof
may be a condition or a warranty.
(2) As per Sec 12(2) of the sale of Goods Act, A condition is a stipulation essential to the main
purpose of the contract, the breach of which gives rise to right to treat the contract as
repudiated.
(3) As per Sec 12(3) of the sale of Goods Act, A warranty is a stipulation collateral to the main
purpose of the contract, the breach of which gives rise to a claim for damages but not to
a right to reject the goods and treat the contract as repudi ated.
(4) Whether a stipulation in a contract of sale is condition or a warranty depends in each case
on the construction of the contract. A stipulation may be a condition.
WHEN CONDITION TO BE TREATED AS WARRANTY
(1) Where a contract of sale is subject to any condition to the fulfilled by the seller, the buyer
may waive the condition or elect to treat the breach of the condition as a breach of warranty
and not as a ground for relating the contract as repudiated.
(2) Where a contract of sale is not severable and the buyer has accepted the goods or part
thereof, the breach of any condition to be fulfilled by the seller can only be treated as a
breach of warranty and not as a ground for rejecting the goods and treating the contract as
repudiated, unless there is a term of the contract, express or implied, to that effect.
(3) Nothing in this section shall affect the case of any condition or warranty fulfill ment of
which is excused by law by reason of impossibility of otherwise.
IMPLIED UNDERTAKING AS TO TILE, ETC
In a contract of sale, unless the circumstances of the contract are such as to show a different
intention, there is—
(a) An implied condition on the part of the seller that, in the case of a sale, he has a right to sell
the goods and that, in the case of an agreement to sell, he will have a right to sell the goods
at the time when the property is to pass.
(b) An implied warranty that the buyer shall have and enjoy quiet possession of the goods.
(c) An implied warranty that the goods shall be free from any charge or encum brance in
favour of any third party not declared or known to the buyer before or at the time when
the contract is made.
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SALE BY DESCRIPTION
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, and, if the sale is by sample as well as by
description, it is not sufficient that the bulk of the goods corresponds with the sample if the
goods do not also correspond with the description.
IMPLIED CONDITION AS TO QUALITY OR FITNESS
As per Sec 16 of the Sale of Goods Act Subject to the provisions of this Act and of any other law
for the time being in force, there is no implied warranty or condition as to the quality or fitness
for any particular purpose of goods supplied under a contract of sale, excepts as follows:-
(1) 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 judgement, and the goods are of a description which it is in the course of the
seller’s business to supply (whether he is the manufac turer or producer or not), there is
an implied condition that the goods shall be reasonably fit for such purpose :
Provided that, in the case of a contract for the sale of a specified article under its patent or
other trade name, there is no implied conditions to its fitness for any particular purpose.
(2) Where goods are bought by description from a seller who deals in goods of that description
(whether he is the manufacturer or producer or not), there is an implied condition
that the goods shall be of merchantable quality.
Provided that, if the buyer has examined the goods, there shall be no implied conditions
as regards defects which such examination ought to have revealed.
(3) An implied warranty or condition as to quality or fitness for a particular purpose may be
annexed by the usage of trade.
(4) An express warranty or conditions does not negative a warranty or condition implied by
this Act unless inconsistent therewith.
SALE BY SAMPLE
(1) 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.
(2) In the case of a contract for sale by sample there is an implied condition -
(a) That the bulk shall correspond with the sample in quality.
(b) That they shall have a reasonable opportunity of comparing the bulk with the sample.
(c) That the goods shall be free from any defect, rendering them un-merchantable, which
would not be apparent on reasonable examination of the goods.
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GOODS MUST BE ASCERTAINED
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 sanctioned.
2.3. PASSING OF THE PROPERTY FROM THE SELLER TO THE BUYER
INTRODUCTION
A Sale is defined as transfer of ownership of the goods from the seller to the buyer for a price
.Therefore what is important in a transaction of sale is the transfer of the ownership. It is essential
to determine the exact point of time at which the ownership of the goods is transferred in
favour of the buyer. Sections 18 to 25 of the Sale of Goods Act, determine when the property
passes from the seller to the buyer.
PROPERTY PASSES WHEN INTENDED TO PASS
(1) Where there is a contract for the 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 transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms
of the contract, the conduct of the parties and the circumstances of the case.
SPECIFIC GOODS IN A DELIVERABLE STATE
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.
SPECIFIC GOODS TO BE PUT INTO A DELIVERABLE STATE
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.
SPECIFIC GOODS IN A DELIVERABLE STATE, WHEN THE SELLER HAS TO DO ANYTHING
THERETO IN ORDER TO ASCERTAIN PRICE
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.
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SALE OF UNASCERTAINED GOODS AND APPROPRIATION
(1) Where there is a contract for the sale of unascertained or future goods by de scription and
goods of that description and in a deliverable state are uncondition ally appropriated to
the contract, either by the seller with the assent of the buyer or by the buyer with the
assent of the seller, the property in the goods thereupon passes to the buyer. Such assent
may be expressed or implied, and may be given either before or after the appropriation is
made.
(2) Delivery to carrier.- Where, in pursuance of the contract, the seller delivers the goods.
GOODS 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—
(a) When he signifies his approval or acceptance to the seller to does not other act
adopting the transaction.
(b) If he does not signify his approval or acceptance to the seller but retains the gods 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 not time has been fixed, on the expiration of a reasonable
time.
RESERVATION OF RIGHT OF DISPOSAL
(1) Where there is a contract for the sale of specific goods or where goods are subsequently
appropriated to the contract, the seller may, by the terms of the contract or appropriation,
reserve the right of disposal of the goods until certain conditions are fulfilled. In such
case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee
for the purpose of transmission to the buyer, the property in the goods does not pass to
the buyer until the conditions imposed by the seller are fulfilled.
(2) Where goods are shipped or delivered to a railway administration for carriage by railway
and by the bill of landing or railway receipt, as the case may be, the goods are deliverable
to the order of the seller or his agent, the seller is prima facie deemed to reserve the right
of disposal.
(3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the
bill of exchange together with the bill of lading or, as the may be, the railway receipt, to
secure acceptance to payment of the bill of exchange, the buyer is bound to return the bill
of lading or the railway receipt if he does not honour the bill of exchange, and, if he wrongfully
retains the bill of lading or the railway receipt, the property in the goods does not
pass to him.
Explanation.- In this section, the expression “railway” and “railway administration” shall have
the meanings respectively assigned to them under the Indian Railways Act, 1890.
CIA-6
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RISK PRIMA FACIE PASSES WITH PROPERTY
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.
SALE BY PERSON NOT THE OWNER
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 the seller had, unless the owner of the goods is by conduct precluded from denying
the seller’s authority to sell.
Provided that, where a mercantile agent is, with the consent of the owner, in possession of the
goods or of a document of title to the goods, any sale made by him, when acting in the ordinary
course of business of a mercantile agent, shall be as valid as if he were expressly authroised by
the owner of the goods to make the same, provided that the buyer act is good faith and has not
at the time of the contract of sale notice that the seller has not authority to sell.
SALE BY ONE OF JOINT OWNERS
If one of several joint owners of goods has the sole possession of them by permission of the coowners,
the property in the goods in transferred to any person how buys them of such joint
owner in good faith and has not at the time of the contract of sale notice that the seller has not
authority to sell.
SALE BY PERSON IN POSSESSION UNDER VOIDABLE CONTRACT
When the seller of gods has obtained possession thereof under a contract voidable under Section
19 or Section 19A of the Indian Contract Act, 1872, but the contract has not rescinded at the
time of the sale, the buyer acquires a god title to the goods, provided he buys them in good
faith and without notice of the seller’s defect of title.
SELLER OR BUYER IN POSSESSION AFTER SALE
(1) Where a person, having sold goods, continues or is in possession of the goods or of the
documents of title to the goods, the delivery or transfer by that person or by a mercantile
agent acting for him of the gods or documents of title under any sale, pledge o other
disposition thereof to any person receiving the same in good aith and without notice of
the previous sale shall have the same effect as if the person making the delivery to transfer
were expressly authorised by the owner of the gods to make the same.
(2) Where a person, having bought or agreed to buy goods, obtains with the con sent of the
seller, possession of the goods or the documents of title to the goods, the delivery or
transfer by that person or by a mercantile agent acting for him, of the goods or documents
of tile under any sale, pledge or other disposition thereof to any person receiving the same
in good faith and without notice of any lien or other right of the original seller in respect
of the gods shall have effect as if such lien or right did not exist.
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DUTIES OF SELLER AND BUYER
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.
2.4. PERFORMANCE OF THE CONTRACT OF SALE
INTRODUCTION
Performance of a Contract of sale means as regards the Seller, delivery of goods to the buyer.
From buyer’s side the performance means the acceptance of the delivery of goods and payment
for them as per the terms and conditions of sale.
PAYMENT AND DELIVERY
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.
DELIVERY
As per the Sale of Goods Act, Delivery is defined as the voluntary transfer of possession from
one person to another.
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.
EFFECT OF PART DELIVERY
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 gods, with an intention of severing it from the whole, does not operate as a delivery of
the remainder.
BUYER TO APPLY FOR DELIVERY
Apart from any express contract, the seller of goods in not bound to deliver them until the
buyer applies for delivery.
RULES AS TO DELIVERY
(1) Whether it is for the buyer to take possession of the goods or for the seller to send them to
the buyer is a question depending in each case on the contract, express or implied, between
the parties. Apart from any such contract, goods sold are to be delivered at the
place at which they are the time of the sale, and goods agreed to be sold are to be delivered
at the place at which they are at the time of the agreement to sell, if not then in
existence, at the place at which they are manufactured or produced.
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(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.
(3) Where the goods at the time of sale are in the possession of a third person, there is no
delivery by seller to buyer unless and until such third person acknowl edges to the buyer
that he holds the goods on his behalf.
(4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable
hour. What is a reasonable hour is a question of fact.
(5) Unless otherwise agreed, the expense of and incidental to putting the goods into a
deliverable state shall be borne by the seller.
DELIVERY OF WRONG QUANTITY
(1) Where the seller delivers to the buyer a quantity of good less than he contracted to sell,
the buyer may reject them, but if the buyer accepts the goods so deliv ered he shall pay for
them at the contract rate.
(2) Where the seller delivers to the buyer a quantity of goods larger than he con tracted to sell
the buyer may accept the goods included in the contact and reject the rest, or he may reject
the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them
at the contract rate.
(3) Where the seller delivers to the buyer the gods he contract 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.
(4) The provisions of this section are subject to any usage of trade, special agree ment or
course of dealing between the parties.
INSTALLMENT DELIVERIES
(1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by
installments.
(2) Where there is a contract for the sale of goods to be delivered by stated install ments which
are to be separately paid for, and the seller makes no delivery or defective delivery in respect
of one or more installments, or the buyer neglects or refuses to take delivery of or pay for one
or more installments, it is a question in each case depending on the terms of the contract and
the circumstances of the case, whether the breach of contract is a repudiation of the whole
contract, or whether it is a sever able breach giving rise to a claim for compensation, but not a
right to treat the whole contract as repudiated.
DELIVERY TO CARRIER OR WHARFINGER
(1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the
goods to he buyer, delivery of the goods to a carrier, whether named by the buyer or not,
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for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for
safe custody, is prima facie deemed to be a delivery of the goods to the buyer.
(2) Unless otherwise authorised by the buyer, the seller shall makes such contract with the
carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the
nature of the goods and the other circumstances of the case. If the seller omits so to do, and
the goods are lost or damaged in course of transit or whilst in the custody of the wharfinger,
the buyer made decline to treat the delivery to the carrier or wharfinger as a delivery
to himself, or may hold the seller responsible in damages.
(3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving
sea transit, in circumstances in which it is usual to insure, the seller shall give
such notice to the buyer as may enable him to insure them during their sea transit and if
the seller fails so to do, the goods shall be deemed to be at his risk during such sea transit.