Chapter 2: Sale of Goods Act, 1930
• Basic Concepts:
• Buyer means a person who buys or agrees to buy goods.
• Delivery means voluntary transfer of possession from one person to another.
• Sale means transfer of property in goods for a price.
• Hire purchase agreement: the seller delivers the possession of goods to the other
person and he charges rent for the goods. After receiving the price of the goods, the
ownership of goods is passed on to the purchaser.
• Barter exchange means exchange of goods for goods.
• Bailment means only the possession is transferred from the bailor to the bailee.
Such transactions may be for the purpose of keeping the goods in safe custody and
may be for furnishing security.
• Definition of sale:
• A contract of sale is made by an offer to buy or sell goods for a price and the
acceptance of such offer.
• The contract may provide for the immediate delivery of goods or immediate
payment of price or both.
• 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.
• There must be at least two parties as a person cannot sell goods to himself.
However, there may be a contract of sale between one part-owner and other one.
• There must be a transfer or agreement to transfer the ownership of goods from one
person to another. Mere transfer of possession is not the sale.
• The subject matter of sale must be goods which are movable. The transfer of
immovable property is not governed by Sale of Goods Act, 1930.
• The consideration for sale is called price which should be stated in terms of money.
Exchange of goods for goods is barter and not sale. However, price can be paid
partly in terms of money and partly in kind.
• All essential elements of a valid contract must be present in contract of sale.
• A contract of sale may be absolute or conditional.
• Classification of goods:
• The goods which form the subject of contract of sale may be either existing goods, owned
and possessed by seller, or future goods or contingent goods.
• Existing goods are owned by seller at the time of sale. They are of following types:
• Specific goods: these are identified and agreed upon at the time of sale.
• Ascertained goods: these become ascertained after the contract is made.
• Generic goods: these are not ascertained at the time of contract and are defined only by
description.
• Future goods are not owned by seller at the time of contract but are manufactured or
acquired by him subsequent to formation of contract.
• Contingent goods: acquisition by seller depends upon a contingency.
•
• Effect of destruction of goods:
• Goods perishing before making of contract: Where there is a contract for sale of specific
goods, the contract is void if the goods, without the knowledge of seller, at the time
when the contract was made, have perished or have become so damaged that they
cannot be described 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 of the seller or buyer,
perish or become so damaged that they cannot be described in the contract. Before the
risk passes to the buyer, the agreement is avoided.
• Condition and warranty:
• A requirement or event that should be performed before the completion of
another action, is known as Condition, the breach of which gives rise to right to
treat the contract as repudiated.
• A warranty is an assurance given by the seller to the buyer about the state of the
product, that the prescribed facts are genuine, the breach of which gives rise to
a claim of damages but not to a right to reject the goods and treat the contract
as repudiated.
• Defined in Section 12 (2) and 12(3) of Indian Sale of Goods Act, 1930.
Passing the property from seller to the buyer:
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 ownership. It is
essential to determine the exact point of time at which the ownership of the goods is
transferred in favor of the buyer.
1. Goods must be ascertained
2. Where there is a contract for the sale of specific goods, the property in them
is transferred to the buyer at such time as the parties to the contract intend
it to be transferred.
3. For ascertaining the intention, regard shall be had to the terms of the
contract, the conduct of the parties, and the circumstances of the case.
Specific goods:
Where there is an unconditional contract for the sale of specific goods in deliverable
state, the property in goods passes to the buyer when the contract is made. It is
immaterial whether the time of payment of the price or the time of delivery of the
goods or both, is postponed.
Where there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for putting them into deliverable state, the property does
not pass until such thing is done and the buyer has notice thereof.
Where there is a contract for the sale of specific goods and when the seller has to do
anything thereto in order to ascertain price, bound to weigh, measure, test etc., the
property does not pass until such thing is done and the buyer has notice thereof.
Unascertained goods:
Where there is a contract for the sale of unascertained or future goods, by description,
and are in a deliverable state, they are unconditionally appropriated to the contract
either by 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.
Reservation of right to disposal
Where there is a contract for the sale of specific goods or where the goods are
subsequently appropriated to the contract, the seller may reserve the right of disposal of
goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of
the goods to the buyer, the property in the goods does not pass to the buyer until the
conditions imposed by seller are fulfilled.
Where goods are delivered to a railway administration, for carriage by railway, the
goods are deliverable to the order of the seller but the seller is prima facie deemed to
reserve the right of disposal.
Where the seller draws on the buyer for the price and transmits to the buyer the bill of
exchange together with bill of lading, the buyer is bound to return the bill of lading if he
does not honor the bill of exchange. If he wrongfully retains the bill of lading, the
property in the goods does not pass to him.
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 the delivery has been made or not.
Sale by person, not the owner
The general rule where goods are sold by a non-owner is that the eventual purchaser
does not gain good title. This means that if B wrongly sells goods belonging to A to a
buyer called C, the items remain the property of A. The fact that C has entirely
innocently purchased items that he believed were owned by B is irrelevant. It is logical
to protect the original owner's title.
This is subject to exceptions:
• Sale by mercantile agent
• Sale by one of the joint owners
• Sale by person in possession under voidable contract
• Seller or buyer in possession after sale
• Sale by estoppel (where the owner leads the buyer that the seller
has authority to sell, he is estopped from denying the fact
afterwards)
• Sale by an unpaid seller after exercising his right of lien or stoppage
in transit
• Sale by liquidator, pledgee, finder of lost goods
Performance of the contract of sale
• As regards the seller, the performance of contract of sale means delivery of goods to
the buyer.
• As regards the buyer, the performance of contract of sale means acceptance of
delivery of goods and payment for them as per the terms and conditions of sale.
• The seller shall be ready and willing to give possession of the goods to the buyer in
exchange for price. The buyer shall be ready and willing to pay the price in exchange
for possession of the goods.
• Delivery is defined as voluntary transfer of possession from one person to another.
Rules as to delivery
• Delivery of goods and payment of price are concurrent conditions unless and
otherwise agreed upon.
• Delivery of part of goods, in progress of the delivery of the whole has the same
effect for the purpose of passing the property in such goods, as a delivery of the
whole. But a delivery of part of the goods with an intention of severing it from the
whole does not operate as a delivery of the remainder.
• Apart from any express contract, the seller of goods is not bound to deliver them
until the buyer applies for delivery.
• 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. Apart from
any such contract, goods sold are to be delivered at the place at which they were at
the time of sale.
• Time of delivery: 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. Demand of delivery may be treated as ineffectual
unless made at a reasonable hour.
• Where the goods at the time of sale are in possession of a third person, there is no
delivery by seller to buyer unless and until such a third person acknowledges to the
buyer that he holds the goods on his behalf.
• Unless and otherwise agreed, the expense of and incidental to putting the goods
into a deliverable state shall be borne by seller.
• Delivery of goods may be actual, symbolic, or constructive.
• 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 pay for them at the contract rate.
• Where the seller delivers to the buyer a quantity of goods larger than he contracted
to sell, the buyer may accept the goods included in the contract and reject the rest
or he may reject the whole. But if the buyer accepts the whole of the goods so
delivered, he shall pay for them at the contract rate.
• Where the seller delivers to the buyer the goods 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 reject the whole.
• Unless otherwise agreed, the buyer of the goods is not bound to accept delivery
thereof by installments.
• Where there is a contract for sale of goods to be delivered by stated installments
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 contract whether the breach of contract is a repudiation
of the whole contract.
• Whereas per contract, the seller is authorized to send the goods to the buyer,
delivery of goods to a carrier whether named by buyer or not, is prima facie deemed
to be a delivery to the buyer.
• Where the seller agrees to deliver the goods at his own risk, at place other than
where they are sold, the buyer shall take any risk of deterioration in the goods.
• Buyer’s right to examine the goods
• Buyer is not bound to return rejected goods
• Liability of buyer for neglecting or refusing delivery of goods: when the seller is
ready and willing to deliver the goods, and requests the buyer to take delivery, and
the buyer does not take the delivery of the goods, he is liable to the seller for any
loss.
Delivery is of following types:
• Actual delivery: in this case, the goods are handed over by the seller to the buyer or
his authorized agent.
• Symbolic delivery: when goods are bulky, and actual delivery is not possible, the
delivery may be symbolic, i.e. handing over the keys of the godown.
• Constructive delivery:
• When the seller holding the possession of goods agrees to hold them on behalf of
buyer.
• When the buyer holding the possession of goods with seller’s consent, holds them
as owner.
• When a third person holding the possession of goods on behalf of seller,
acknowledges to hold them on behalf of buyer.
Rights of the buyer:
• Right to have delivery as per contract
• Right to reject the goods
• Right to repudiate (Not to accept delivery by installment)
• Right to notice of insurance (unless agreed, goods are sent by sea route, the buyer
has a right to be informed by seller to get the goods insured)
• Right to examine the goods before accepting
• Right against the seller for breach of contract
• Suit for damages
• Suit for price
• Suit for specific performance
• Suit for breach of warranty
• Repudiation of contract before due date
• Suit for interest on the refund
Duties of the buyer:
• Duty to accept the goods and pay for them in exchange for possession
• Duty to apply for delivery
• Duty to demand delivery at a reasonable hour
• Duty to accept installment delivery and pay for it
• Duty to take risk of deterioration in course of transit
• Duty to intimate the seller where he rejects the goods
• Duty to take delivery
• Duty to pay prices according to terms of contract
• Duty to pay damages for non-acceptance
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