MODULE D

The Sale of Goods Act,

1930
Meaning and Essentials of a Contract of Sale
Meaning of some of the Important Terms Defined Under the Sale of
Goods Act, 1930, Meaning of Contract of Sale of Goods, Features of
Contract of Sale of Goods, Sale and Agreement to Sell, Distinction
between a Sale and an Agreement to Sell

Conditions and Warranties

Meaning of Condition and Warranty, Implied Conditions and
Warranties

Unpaid Seller
Rights of an Unpaid Seller
Introduction

The Sale of Goods Act, 1930, extends to the whole of India. The
Contract Act covers the aspects of general principles and essentials
of contracts made in the commercial world. A contract for the sale of
goods is also governed by the general principles and essentials as
stated in the Contract Act.

However, the Sale of Goods Act is specially enacted to lay down the
law relating to the sale and purchase of moveable goods in the
country.

The provisions of the Sale of Goods Act spell out the contractual
rights and liabilities of the seller and buyer in detail.
Definition of Goods
Includes Excludes

Growing crops Immovable property

Standing Timber Actionable claim( According to Section 3 of the Act, actionable claim means:
Claim to an unsecured debt
Beneficial interest in a movable property
These are both claims that are recognized in the Courts of law as affording relief)

Grass Money/Currency

Old currency

Water

Gas

Electricity

Trademark, Patent ,Copyright

Goodwill

Shares(After allotment), Stock

Meaning of Contract of Sales of Goods Act

A contract of sale of goods is a contract under which

the seller transfers or agrees to transfer the property in
goods to the buyer for a price.

When the property in the goods is transferred from the

seller to the buyer, the contract is called a sale.
Features of Contract of Sales of Goods Act
(a)Bilateral contract: A sale involves two persons – The buyer and the
seller.
(b) Money consideration: The consideration for a sale of goods must be
money, called the price payable for the transfer of goods. It cannot be a
barter, where goods are exchanged for goods.
(c) Moveable property: The Sale of Goods Act covers only the sale of
moveable goods and not immoveable property like land and building. The
contracts relating to transfer of immoveable property are governed by the
Transfer of Property Act and not Sale of Goods Act.
(d) No particular form: The Sale of Goods Act does not make it
mandatory to enter into written contracts for the sale of goods. However, if
any particular law provides for sale of certain types of goods to be done by
a contract in writing, then that law has to be complied and the contract has
to be in writing. The contract may be oral or written or can be implied by
the conduct of the parties. 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:

• Immediate delivery of the goods on immediate payment of the price.
• For the delivery or payment by instalments.
• Postponement of delivery or payment.
Sale and Agreement to Sale

A contract of sale may be absolute or conditional. In an absolute

contract for sale of goods, there are no conditions to be fulfilled
by the seller or the buyer for the sale and purchase of the goods. In
a conditional sale, the parties to the contract (seller and buyer)
agree that the sale of goods shall be regarded as final only on the
fulfilment of certain conditions either before or after the conclusion
of the contract for sale of goods.

When the seller of goods has obtained possession thereof under a

contract voidable because consent is taken by coercion, fraud,
undue influence or misrepresentation, but the contract has not
rescinded at the time of the sale, the buyer acquires a good title to
the goods, provided he buys them in good faith and without notice
of the seller’s defect of title.
When 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.

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. Thus, when an agreement to sell provides
that the property in goods (the ownership) shall pass on a certain
date, then the agreement to sell becomes a sale on that date.

Further, if an agreement to sell provides that the ownership in goods

shall pass only on the fulfilment of such and such conditions by the
seller and such and such conditions by the buyer, the agreement to
sell becomes a sale, only on the fulfilment of such conditions as
agreed to between the parties.

.
Difference between Sale and Agreement to Sale
Condition and Warranty

Under Section 12(1) of the Sale of Goods Act, “A stipulation in a contract

of sale with reference to goods which are the subject thereof may be a
condition or a warranty”

If the stipulation agreed to between the parties is essential to the main

purpose of the contract and is of such a nature that if the stipulation is
breached (i.e. violated/not complied) then a party to the agreement would
have a right to treat the contract as repudiated (cancelled) then such a
stipulation is known as a condition.

Ex-TV is of 3D quality.

On the other hand, a warranty is a stipulation collateral to the main

purpose of the contract. The breach of such a stipulation gives rise to a
claim for damages only. The parties cannot reject the goods and treat the
contract as repudiated.

Ex-Mobile battery dead within 1 month

Implied Condition and Warranty
In a contract of sale of goods conditions and warranties may be either
expressed or implied. Expressed conditions and warranties are those, which
are expressly stated in the contract. Implied conditions and warranties are
those, which the law interprets to imply to every contract of sale of goods.
However, such implied conditions and warranties can be excluded by the
parties to the contract if they agree expressly on these issues.

A. Title of the seller

Illustration
A buys a second-hand car from B and pays him. Police takes away the car, as
it was a stolen one. A can recover the price paid, from B, as he has violated
the implied condition above.

B. Sale of goods by description

Illustration
A sells certain curtains to B by describing them to be of seventeenth century.
Later on B discovers that the curtains are not of the seventeenth century. B
can reject the goods and claim back the price.
C. Sale by sample

Illustration
A wants to buy rubber material of a certain length and width. B shows a
sample to A. A approves the sample but B delivers the same material with
a variation in the length of the rubber. A can reject the goods as the goods
did not correspond with the sample in quality.

D. Sale is by sample as well as by description

Illustration
A sells to B, ‘foreign rape-seed refined oil’. He even shows a sample to B.
Afterwards the oil according to the sample is delivered to B. When the oil is
delivered to B, he discovers that there is some ‘hemp oil’ also mixed in it.
B can reject the goods because he was delivered as per the sample but the
sample and oil itself were not ‘foreign rape-seed refined oil’ as described
by A.
E. Quiet possession
There is an implied warranty that the buyer shall have and enjoy quiet
possession of the goods.

F. Goods are free from any charge or encumbrance

There is an implied warranty that the goods shall be free from any charge
or encumbrance in favour of any third party not declared or known to the
buyer before or at the time when the contract is made. This means that the
buyer can assume that the goods that are being sold to him would be his
absolute property and no one would claim any right over the goods in
future once he pays the price and purchases them from the seller.

G. Quality or fitness of goods for any particular purpose

Illustration
A buys a hot water bottle from B (a retail chemist). A asked B whether it
would hold hot water. B says it is meant to hold hot water only. A’s wife is
injured as the hot water bottle bursts. B was held liable for breach of
implied condition as to the quality or fitness of the hot water bottle.
CAVEAT EMPTOR

1. Caveat means a warning, a caution.

2. According to the doctrine of caveat emptor, the person who buys

goods must keep his eyes open, his mind active and be cautious
while buying the goods.

3. In other words, the buyer must examine the goods thoroughly.

Later on, if the goods do not serve his purpose or he depends
upon his own judgement and he makes a bad choice, he cannot
blame the seller for selling him such goods.

4. The Sale of Goods Act also enshrines doctrine by stating that

‘There is no implied warranty or condition as to the quality or
fitness of goods for any particular purpose’ except in cases
specifically explained above.
Introduction of Unpaid Seller

The seller of goods is deemed to be an ‘unpaid seller’(Sec. 45 of

Sale of Goods Act, 1930)

(a) When the whole of the price has not been paid or tendered;

(b) When the payment for the goods is received in the form of a
cheque or other negotiable instrument and the same is
dishonoured for financial or other reasons.

Here, the term ‘seller’ includes any person who is in the position of
a seller, e.g., an agent of the seller, to whom the bill of lading has
been endorsed, or a consignor or agent who has paid for goods to
the seller.
 Goods are in
Right to Lien possession of seller

Right of
Against the Goods are in transit
stoppage in
Goods
transit
Goods are in
perishable nature
Right of Resale & other goods
Right of Unpaid
Seller

Suit for Price Property has passed to

the buyer (Refuse to pay
Against the price)

Buyer Suit for damages ➢ Non Acceptance

➢ For Breach
for non ➢ For Interest
acceptance
Unpaid seller’s rights against the goods

The following rights are available to the unpaid seller, whether the
property in the goods has passed to the buyer or not:

(a) a lien on the goods for the price while he is in possession of

them;

(b) in case of insolvency of the buyer, a right of stopping the

goods in transit after he has parted with the possession of them;

(c) a right of resale. If the property in goods has not passed to the
buyer, the unpaid seller also has a right of withholding delivery
of the goods.
Unpaid seller’s lien (Sec. 47)

The unpaid seller of goods (who is in possession of them), is

entitled to retain possession of them until payment of the price is
made in the following cases:

(a) if the goods have been sold without any stipulation as to credit;
(b) if the goods have been sold on credit, but the term of credit has
expired;
(c) if the buyer becomes insolvent.

Where an unpaid seller has made part delivery of the goods, he

may exercise his right of lien on the balance goods, unless he
makes part delivery under circumstances to show that he would
waive the right to lien on all goods. The seller may exercise the
right of lien notwithstanding that he is in possession of the goods
as an agent or bailee for the buyer.
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;
(b) when the buyer or his agent lawfully obtains possession of the goods;
(c) by waiver of lien.
However, the lien is not lost just because the seller obtains a decree for the price of
the goods.

Right of stoppage in transit

When the buyer becomes insolvent, the unpaid seller who has parted with the
possession of the goods has the right of stopping them in transit. He may retain
them until payment of the price.

Duration of transit
Goods are deemed to be in course of transit from the time when they are delivered
to a carrier or other bailee for the purpose of transmission to the buyer and the
transit ends, when the buyer or his agent takes delivery of them from such carrier
or other bailee.

How stoppage in transit is affected?

The unpaid seller may exercise his right of stoppage in transit either by taking actual
possession of the goods, or by giving notice of his claim to the carrier or other
bailee in whose possession the goods are.
Effect of sub-sale or pledge by buyer (Sec. 53)
▪ The unpaid seller’s right of lien or stoppage in transit is not affected by a further sale
or by other disposition of the goods, which the buyer may have made (unless the
seller has given his permission). Exception to this is when any person in good faith
and for consideration takes documents of title to goods from a buyer; or transfer of
goods is by way of pledge, where right of unpaid seller may get defeated.
▪ If the goods are of a perishable nature, or if the unpaid seller, who has exercised his
right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell,
the unpaid seller may, if the buyer does not within a reasonable time pay the price,
resell the goods.
▪ He can also recover from the original buyer, damages for any loss occasioned by his
breach of contract. The buyer is not entitled to any profit which may occur on the
resale.
▪ If the unpaid seller does not give, a prior notice of sale to the buyer, then the unpaid
seller is not entitled to recover damages from the buyer. On the contrary, the buyer
becomes entitled to the profit on a resale.
▪ If the unpaid seller who has exercised his right of lien or stoppage in transit re-sells
the goods, the, ‘new’ buyer acquires a good title to the goods as against the original
buyer, even if no notice of the resale was given to the original buyer.

Unpaid seller’s rights against the buyer personally

These rights arise out of breach of contract and the seller can file a suit to claim
damages, claim the price of goods with interest and he can also repudiate the contract.
❑ Revise the concept of Paid Batch
❑ Focus on YouTube Questions
❑ Mock Paper
❑ E-books
❑ Have a confidence on yourself