CHAPTER 9

SALE OF GOODS ACT, 1930

The Sale of Goods Act came into force on 1 st July 1930 and it extends to the
whole of India except the state of Jammu and Kashmir. Now all the legal provisions
relating to the sale of movable goods are contained in the sale of Goods Act, 1930.
Meaning and Definition of Contract of Sale
Contract of sale is a contract by which ownership of movable goods is
transferred from the seller to the buyer. It is a contract to transfer the property in the
goods to the buyer for a price.”
The parties to the contract of sale are:
1. The seller: A person who sells or agrees to sell the goods is known as seller.
2. The buyer: A person who buys or agrees to buy the goods, is known as the
buyer.
The contract of sale may be absolute or conditional. In an absolute sale, the
ownership of goods passes from the seller to the buyer immediately. In a
conditional contract of sale, the ownership of goods does not pass to the buyer
absolutely until certain conditions are fulfilled.
The term ‘contract of sale’ is a general term and it includes both sale and
agreement to sell.
Sale
‘Sale’ means, the ownership of the goods is immediately transferred from a
seller to a buyer.
The term ‘sale’ is defined in section 4(3) of the Sale of Goods Act, which reads
as under:
“Where under a contract of sale the transfer of property in the goods is
transferred from the seller to the buyer, the contract is called a sale.”
Example: On 1st December A sells his car to B for Rs. 1 lac. It is a sale
because the ownership of the car has been transferred immediately from A to B.
Agreement to Sell
Agreement to sell means, the transfer of legal ownership of goods is to take
place at a future date or subject to the fulfilment of certain conditions.
The ‘agreement to sell’ is also defined in section 4(3) of the Sale of Goods Act,
which reads as under:
“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 an agreement to sell.”
 Example: On 1st January, A agrees to sell his car to B for Rs. 1 lac on 1 st
March. This is an agreement to sell because the transfer of ownership of car
takesplace only at a future date.
Differences between sale and agreement to sell
Sale Agreement
1. The ownership of the goods is The ownership is to be transferred only at
transferred from the seller to the buyer some future time or after the fulfilment of
immediately after the contract. certain conditions.
2. If the goods are destroyed after the If the goods are destroyed after the
agreement, the loss falls on the buyer agreement to sell, the loss as a rule, falls
even though the goods are within the on the seller.
possession of the seller.
3. A sale is an executed contract. An agreement to sell is an executor
contract.
4. If the buyer fails to pay the price, the If the buyer fails to accept and pay for the
seller can sue for the price. goods, the seller is only entitled to
damages.
5. If the buyer becomes insolvent before If the buyer becomes insolvent, the seller
he pays for the goods the seller can may refuse to deliver the goods unless
claim rateable dividend for the price paid for.
due.
6. If the seller becomes insolvent the If the seller becomes insolvent, the buyer
buyer is entitled to recover the goods who has paid the price can only claim
from the official receiver. rateable dividend.

Hire Purchase Agreement and Contract of Sale

The term ‘hire purchase agreement’ is defined in section 2 (c) of the Hire
Purchase Act, 1972, which provides that in hire purchase agreement, the owner
delivers his goods to a person (ie., hirer) for his use and the hirer agrees to pay the
fixed amount by the specified periodical instalments. The parties may also agree that
the ownership of the goods will be transferred to the hirer after the payment of all
agreed instalment.
Distinction between sale and hire purchase agreement
Sale Hire Purchase Agreement
1. It may be made either orally or in It must be in writing.
writing.
2. The ownership of the goods is The ownership of the goods is transferred
transferred from the seller to the buyer only when all agreed number of
as soon as the contract is made. instalments are paid.

3. The buyer has no option to return the The hirer has an option to terminate the
 goods. He is bound to take delivery of agreement at any stage. He may or may
goods. not buy the goods.
4. The buyer becomes the owner and gets The hirer does not become the owner. He
all the rights of the owner, like right to
becomes the owner, only when all the
pledge, resale etc. instalment are paid.
5. Each instalment of payment of price is The instalment is regarded as the hire
regarded as part payment of the price. charges for the use of goods. If the hirer
purchase the goods, then each instalment
is regarded as the part payment.
6. Sale is governed by the sale of Goods It is governed by the Hire Purchase Act,
Act, 1930. 1972.
7. Sale tax is payable on the goods sold. Sale tax is not payable on hire purchase
until it becomes sale.

Essentials of a valid Contract of Sale

The legal definition of the term ‘Contract of Sale’ reveals certain essential
elements of a contract of sale. There are discussed as under, and are necessary for a
valid contract of sale:
1. All the requirements of a valid contract must be fulfilled: Contract of sale
must fulfil all the requirements of a valid contract like free consent; lawful
object; consideration, competency of the parties etc. If any of the essential
elements of a valid contract is missing, the contract of sale will not be valid.
Example: A agreed to sell certain furniture to B without consideration. This
agreement is not valid as it is made without consideration.
2. There must be two parties to the contract of sale: In order to constitute a valid
contract of sale, there must be two parties. They are the seller and buyer. The
reason is that in a contract of sale the ownership of the goods has to pass from
one person to another. So the seller and buyer must be two different persons.
3. The subject matter of the contract of sale must be movable goods: It is an
essential element of a contract of sale that the subject matter of the contract of
sale must be movable goods. Goods means every kind of movable goods and
it includes (a) stock and share (b) growing crops, grass, (c) copy right and
patent right, (d) Gas and electricity etc. It is to be noted that the term ‘goods’
does not include immovable property.
4. The ownership of the goods must be transferred to the buyer: In every
contract of sale, the ownership of the goods must be transferred by the seller to
the buyer or there should be an agreement by the seller to transfer the
ownership to the buyer. However, the physical delivery of the goods is not
essential. If the title in the goods (ie all ownership rights) has been transferred
to the buyer, it will be valid contract of sale.
5. There must be some price for the goods: It is also an essential element of a
contract of sale. According to this element, the goods must be sold for some
price. Price is the money consideration for a contract of sale. Where the
ownership of the goods is transferred for any consideration, other than the
 money, that will not be a sale. Where the goods are exchanged for goods, it is
not a sale but barter.
It may, however, be noted that the consideration may be partly in cash and
partly in terms of goods.
6. Contract of sale may be made either orally or in writing.

Subject matter of Contract of Sale.

Goods form the subject matter of contract of sale. According to sec. 2 (7)
goods means every kind of movable property other than actionable claims and money;
and includes stocks and shares, growing crops, grass and things attached to or forming
part of land which are agreed to be severed before sale or under the contract of sale.
Things like water, gas, copy right, trade mark, electricity etc. are goods.
An actionable claim is something which can only be enforced by action in a
court of law. A debt due from one person to another is an actionable claim and cannot
be bought or sold as goods.
Goods may be divided into three types namely:
1) Existing goods 2) Future goods) 3) Contingent goods

1) Existing goods
Goods owned and possessed by the seller at the time of the making of the
contract of sale are called existing goods. Sometimes the seller may be in
possession but may not be the owner of goods. Where the existing goods are
the subject matter of a contract, they must be in actual existence since a present
sale can be made only if the subject matter having actual existence.
Existing goods may again be either specific, ascertained or unascertained.

Specific Goods Sec. 2(14)

Specific goods means goods identified and agreed upon at the time a contract
of sale is made. Where there is a contract for specific goods, the seller would
deliver the goods actually identified.

Example
(1) A specified watch, dog etc.
(2) A had five cars of different make. He agreed to sell his ‘Maruti’ car B for
Rs. 1 lac and B agreed to purchase the same car. In this case, the sale is for a
specific goods as the car has been identified and agreed at the time of contract
of sale.

Ascertained Goods
These are goods identified in accordance with the agreement after the contract
of sale is made. Ascertained goods are sometimes used as specific goods but it
is not always the same. Specific goods are identified at the time of sale while
ascertained goods are identified as per the agreement after the contract of sale
is made.
 Example:
A had 30 tables of the same kind. He agreed to sell 10 tables to B for Rs.5,000.
In this case, the goods are ascertained only when 10 particular tables be
appropriated towards the contract. On appropriation the goods become
ascertained.

Unascertained goods or Generic goods

These are the goods which are not identified and agreed upon at the time of the
contract of sale. They are defined by description or even by samples. The
seller in the case of a contract for the sale of unascertained goods has the
option, rather the right to supply goods of the kind or quality contracted for.

Example:
A promises to sell to B one of his five cars without pointing out specially any
one of them. This is a sale of unascertained car.

2) Future goods
These are the goods which a seller does not posses at the time of the contract
but which will be manufactured, or produced, or acquired by him after making
of the contract of sale (sec. 2(6). A contract for the sale of future goods is an
‘agreement to sell’ and not ‘sale’.

Case Union of India V. Tara Chand

Example: A agrees to sell to B all the coconuts which will be produced in his
property next year, is an agreement for sale of future goods.

3) Contingent goods
The contingent goods are a type of future goods, the acquisition of which by
the seller depends upon a contingency which may or may not happen sec 6(2).
Such contracts give no right of action if the contingency does not happen.
Example: A agreed to sell to B certain goods which are to be arrived by a
ship. In this case, a contract is for the sale of contingent goods as the
availability of the goods depends upon the arrival of the ship.

Transfer of Ownership or Passing of Property

The term ‘property in the goods’ may be defined as the legal ownership of the
goods. On the passing of the property to the buyer, he become the owner of the
goods.
The term ‘property in goods’ must be distinguished from the term “possession
of goods. The term ‘property in goods’ means the ownership of the goods, whereas
the term ‘possession of goods’ means the custody or physical control over the goods.
Examples, an agent or a servant may have the possession of goods. But he is not the
owner, because the ownership of goods lies with the principal or master. At the same
time, a person may be the owner of the goods, but he may not have the possession of
the goods. It is to be noted that the ownership of the goods may pass with or without
the transfer of possession.
The following points are significant for the transfer of the goods.
1. Risk passes with the ownership: Sometimes, the goods are lost or destroyed
due to theft, fire etc. In such case, if it is the owner who has to suffer the
loss of the goods. Thus, before the ownership of the goods is transferred, it
is the seller who has to bear the risk for the loss of the goods. After the
transfer of ownership, it is the buyer who has to bear the risk for the loss of
the goods. In other words, the risk passes with the transfer of ownership.
2. Proprietary rights over the goods: The term ‘proprietary rights’ means the
right relating to one’s own property. As a matter of fact, after the transfer
of ownership of goods, the buyer becomes entitled to exercise all the
proprietary rights over the goods as the owner.
3. Seller’s right for price: Seller become entitled to recover the price of the
goods from the buyer only after the ownership of the goods has been
transferred to the buyer.
4. Insolvency of the seller or buyer: An ‘insolvent’ means a person who has
been declared by the court to be unable to pay his debts.
If the seller is declared to be insolvent, the Receiver can not take over the
possession of the goods from him, if the ownership had already been
transferred to the buyer.
If the buyer is declared insolvent, the Receiver can not take over the
possession of goods from the buyer if the ownership is still with the seller.

Transfer of Title by Non-owners

The rule of ‘Nemo dat quod non habet’ and its exceptions
When a sale of goods is effected by a person who is not the full owner of the
goods, he cannot transfer an absolute title over the property in favour of the purchaser.
The general rule is that only the owner of the goods can sell the goods. In order to
get a title free from defects the transferors title should also be without defects. In
other words, a person can transfer only that which he himself has. The general rule is
that no one can transfer a better little than what he himself possesses. This is
expressed by the maximum Nemo dat quod non habet (no one gives who possesses
not). If a seller, therefore, has no title or has only a defective title, the buyers title
will be equally wanting or defective as the case may be, though he may have
purchased the goods bonafide and for value.

Farquaharson vs King
 Eg. X found a ring. He made a reasonable search for the owner but did not
find him. He then sold the ring to Y. It was held that the true owner can recover the
ring from Y.

The general principle regarding passing of title is subject to a number of

exceptions.
1. Authority or consent of owner: Where goods are sold by a person with the
consent of the owner, the transferee gets a goods title, eg: an agent who sells
goods on behalf of the principles.
2. Estoppel: When the true owner is stopped by conduct from denying the sellers
authority to sell, the fransferee will get a good title as against the true owner.
Ex. Suppose ‘X’ is the owner of certain goods. X acts in such a manner that Y
induced to believe that the goods belong to Z. On that belief Y buys the goods
from Z. Under these circumstances the Court will not allow X to prove his
ownership. Thus Y gets a good little to the goods eventhough he has
purchased them from Z who is not the owner.
3. Sale by a co-owner: If one of several joint owners of goods has the sole
possession of them by permission of the co-owners, the property in the goods is
transferred to any person who buys them from such joint owner in good faith
and the buyer gets a good title.
4. Sale of goods under a voidable agreement: When the seller of goods has
obtain the possession of them under a voidable contract, but the contract has
not been rescinded at the time of the sale, the buyer acquires a good title to the
goods. It is also necessary that the buyer should act in good faith and without
notice of the sellers defect of title.
Suppose A, by a misrepresentation induces B to sell and deliver to him some
article. After that A sells the articles to C before B has rescinded the contract.
Then the property in the articles is transferred to C. B is entitled to
compensation from A for any loss which B has sustained by being prevented
from rescinding the contract.
5. Sale by the seller in possession of goods after sale: Where a person, having
sold gods, continues to be in possession of the goods, or of the documents of
the gods, a transfer of title by him or his agent by way of sale or pledge gives a
good title to the transferee provided the transferee was acting in good faith and
had no knowledge of the sellers want of title. The original buyer in such cases
can obtain damages from the seller but cannot recover the goods from the
second buyer.
Eg: X buys a picture from a shop and leaves it with the shop keeper. The
shop keeper sells it to Y who has no knowledge of the previous sale. Y gets a
good title. X’s only remedy is to proceed against the shop keeper for damages.
For the application of this rule the following conditions are to be satisfied.
i. The seller must continue in possession of the goods or of the documents
of title to the goods as such. Possession in another capacity for eg. as a
 hirer of the goods from the buyer after delivery of the goods to him will
not be sufficient.
ii. The goods must have been delivered to the buyer or the documents of
little must have been transferred to him. A mere agreement for sale,
pledge or other disposition will not be enough.
iii. The second buyer must act in good faith and without notice of the
previous sale.
6. Buyers in possession of goods over which the seller has some rights: When
goods are sold subject to some lien or right of the seller (Eg. for unpaid price)
the buyer may sell, pledge or other wise dispose of the goods to a third party
and give him a good title, provided the following conditions are satisfied.
i. The first buyer is in possession of the goods or of the documents of title
to the goods with the consent of the seller.
ii. The transfer must be made by the buyer or by a mercantile agent acting
for him.
iii. The person buying the same, act in good faith and without notice of any
lien or other right of the original seller.
7. General Exception: The provision of the sale of goods acts regarding transfer
of title are subject to the provisions of other laws in force. Under section 14 of
the Act these is a condition implied in every contract of sale that the seller has a
right to sell the goods. By the provision of the Civil procedure code, a
RECEIVER is entitled to effect valid sale of the property in his custody though
he is not an owner of the property. Pledgee’s may sell goods on pledger’s
default. An agent of necessity may sell eg: a master of a ship can, in cases of
necessity mortgage or sell the ship or the cargo.
8. Resale by unpaid seller: Where an unpaid seller who has exercised his right
of lien or stoppage in transist, can resell the goods, the buyer acquires a good
titles as against the original buyer eventhough no notice of the resale has been
given to the original buyer.
9. Market Overt: In England a person acquires a valid title in case of goods
purchased by him in market overt. A market overt is an open, public and
legally constituted market. When goods are sold in market overt to a bonafide
purchaser, without notice of the defect in the seller’s title, and according to the
usage of the market, the sale is binding on the true owner. The sale may be
according to the usage of the particular market.
Conditions and Warranties
Condition
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. It goes to the
roof of the contract. Its non fulfilment defeat the very basis of the contract.
Sec.12(3).
 Condition is a stipulation which form the basis of a contract of sale. If the
condition proves to be false, the buyer has the right to terminate the contract and to
have the refund of the price.
Example: A went to B, a horse dealer, and told him that he wanted a horse which
could run at a speed of 50 km per hour. B pointed out a particular horse which could
run at a speed of 50 km per hour. B pointed out a particular horse and said that this
will suit his purpose. A purchased the horse. Subsequently it was found that the
hourse runs at a speed of 30 km per hour. In this case the representation made by the
seller is a condition as it is essential to the main purpose of the contract. In this case,
A may reject the horse and get back the price.
Warranty
A warranty is a stipulation which is collateral to the main purpose of the
contract. The breach of warranty gives rise to a claim for damages, but not to a right
to reject the goods and treat the contract as repudiated sec. 12(3).
The term ‘warranty’ may be defined as “a representation made by the seller
which is not of that importance as a condition”.
Non-fulfilment of warranty does not defeat the very purpose of the buyer. It is
a stipulation which is not essential to the main purpose, but it is only subsidiary to the
main purpose. If it proves to be untrue, the buyer can not put an end to the contract.
He can only claim damages from the seller.
Example: A, a customer went a to B, a horse dealer and told him that he wanted to
buy a healthy horse. B pointed at a particular horse and said it to be health.
Moreover, B informed A that the particular horse can also run at a speed of 40 km per
hour. A bought particular horse. Later, A found the horse to be healthy. But it could
run only at a speed of 20 km per hour. A wanted to reject the horse and to have the
refund of the price. In this case, the representation made by the seller, B, is a
warranty because it is only collateral to the main purpose. Thus A cannot reject the
horse, but he can claim damages.
Differences between conditions and warranties
Conditions Warranty

1. A condition is a stipulation which A warranty is a stipulation which is

is essential to the main purpose of collateral to the main purpose of the
the contract. contract.

2. If there is a breach of condition the If there is a breach of warranty the other

aggrieved party can repudiate the party can only claim for damages.
contract.

3. A breach of condition may be A breach of warranty cannot be

treated as a breach of warranty considered as a breach of condition.
Express and Implied Conditions and warranties
In a contract of sale of goods conditions and warranties may be express or
implied. Express conditions and warranties are those which are expressly provided in
the contract and implied conditions and warranties are those which the law implies in
the contract.
Implied conditions
1. Conditions as to title (Sec. 14): In a contract of sale of goods there is an
implied condition that the seller has
a. In the case of sale a right to sell the goods.
b. In the case of an agreement to sell, he will have a right to sell the gods at
the time when the property will have to pass.
2. Sale by description (sec. 15): When thee is a contract for the sale of goods by
description, there is an implied condition that the goods shall correspond to the
description. It applies to all cases where the purchaser has not seen the articles
sold and relies on the description given to him by the seller. It is a condition
which goes to the root of the transaction and the breach entitles the buyer to
reject the goods.
3. Sale by Sample (Sec. 17(2)): A contract of sale is one by sample when there is
a term in the contract either express or implied to that effect. The sample
speaks for itself. In the case of a contract of sale by sample there is an
implied condition that,
a. The bulk shall correspond with the sample in quality.
b. The buyer shall have a reasonable opportunity for comparing the sample
with the bulk.
c. The goods supplied shall be free from any defect rendering them
unmerchantable which would not be apparent on a reasonable inspection
of the sample. If the defect is apparent and visible, the seller is not
liable. But the seller is liable if the defects are not discoverable on a
reasonable examination.
4. Sale by description as well as sample (sec. 15): If the sale is by sample as well
as by description the goods must correspond both with the sample as well as
with the description.
5. Condition as to the quality or fitness (sec. 16(1)): In a contract of sale there is
no implied condition as to the quality or fitness of the goods for a particular
purpose. The buyer must examine the goods thoroughly before he buys them
in order to satisfy himself that the goods will be suitable for the purpose to
which ye is buying them.
If the buyer expressly or by impliedly makes known to the seller the purpose,
there is an implied condition that the goods are reasonably fit for that purpose.
Priest v Last: The purchaser of a hot water bottle was told by the seller that it
was suitable for holding hot water. When his wife used it, the bottle burst and
 she suffered injuries. It was held that the purchaser could recover from the
seller expenses incurred for treatment of his wife’s injuries.

6. Condition as to Merchantability (Sec.16(2)): When goods are bought by

description from a seller who deals in goods of that description, there is an
implied condition that the goods are not merchantable quality. The means that
the goods should be such as commercially suitable under the description by
which they are known in the market at their full value.
Grant v Australian Knitting Mills
Here the buyer purchased some woollen banians from a company dealing in such
goods, and after wearing them contracted a skin disease due to excessive presence
of chemicals on the garments. It was held that the article was not merchantable
and the company was liable to pay damages.
7. Condition as to wholesomeness (sec. 16(2)): It is a part of the condition as to
merchantability. It is applicable in cases of eatables, ie., foodstuffs and other
goods which are used for human consumption. In such cases, there is an
implied condition that the goods must be wholesome, ie., sound, pure and fit
for consumption at time of sale.
Frost Vs. Aylesury Dairy Co.
Frost purchased some milk from a dairy. Milk contained some typhoid germs.
After consuming the milk, A’s wife got infection and died. It was held that
Brost was entitled to recover damages from the dairy.
8. Condition implied by custom or usages (Sec. 16(3)): An implied condition as to
quality or fitness for a particular purpose may also be annexed by the usage or
custom of trade in the locality concerned.
Implied Warranties
All implied conditions may be treated as warranties at the option of the buyer.
When a contract of sale is subject to any condition to be fulfilled by the seller and the
seller commits a breach of the condition the buyer may treat the contract as repudiated
and refused to accepts the goods. But he can elect to accept the goods treating the
breach as a warranty and can claim damages on the breach. This does not mean that
the conditions become a warrenty, but only that the legal remedies for the breach of
condition become limited to the remedies for a breach of a warrenty.
The following are the implied warranties:
1. Warranty of quite possession: It is an implied warranty to the buyer that he
should have quite possession and enjoyment of the goods sold to him without
any disturbance from the seller or any other person. Being a warranty, its
breach entitles the purchaser to get damages but cannot repudiate the whole
contract.
2. Warranty of freedom from encumbrances: There is an implied warranty that
the goods sold are free from any charge or encumbrance in favour of third
 person. The warrenty amount to a promise by the seller that the buyers
possession shall not be disturbed by reason of the existence of an encumbrance.
3. Warranty to disclose dangerous nature of goods: Where a person sells goods
knowing that the goods are basically 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, otherwise he shall be liable for
damages.
Caveat Emptor
Caveat emptor means ‘let the buyer beware’. It means that in a sale of goods
the seller is under no duty to reveal unflattering truth about the goods sold.
Therefore, when a person buys some goods the buyer must examine them thoroughly.
If the goods turns out to be defective, or do not suit for the purpose or if he depends
upon his own skill and makes a bad selection, he cannot blame the seller. Eg. ‘X’
bought oats from ‘S’ a sample of which was shown to ‘X’. ‘X’ believed that the oats
were new. The oats were however old. It was held that ‘X’ could not avoid the
contract.
As a matter of fact, it is the duty of the buyer to select goods of his
requirement. The seller is not bound to supply the goods which shall be fit for any
particular purpose of the buyer or which should possess any particular quality. This
rule is known as ‘Doctrine of Coveat Emptor’.
Wadd V Hobs
‘X’ sent to market 32 pigs to be sold by auction. The pigs were sold to ‘W’
“with all faults and errors of description.” ‘X’ knew that the pigs were suffering from
severe fever. But he never disclosed it to ‘W’. Held that there was no implied
warrenty by X and sale was good and ‘X’ was not liable for damages.
The Rule of caveat emptor is, however, subject to the following exceptions.
1. Fitness for buyers purpose: When the buyer expressly or by implication
makes known to the seller the particular purpose for which he requires the
goods and relies on the sellers skill or judgement, the seller must supply the
goods which shall fit for the buyers purpose. Eg. An order was placed for
some lorries to be used for heavy traffic in a hilly areas. The lorries
supplied were unfit and break down. There is a breach of contract as to the
fitness.
2. Sale under a patent or Trade name: In the case of a contract for sale of a
specified article under its patent or other trade name, there is implied
condition that the goods shall be reasonably fit for that particular purpose.
Here, if any defect occurs, the principle of caveat emptor does not apply and
therefore the seller is liable for the loss of the buyer.
3. Merchantable quality: The goods 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. This means that the goods should be such as
 commercially suitable under the description by which they are known in the
market. In such cases the Doctrine of Caveat Emptor does not apply.
4. Consent by fraud: If the consent of the buyer in a contract of sale is
obtained by fraud or where the seller knowingly conceals a defect which
could not be discovered on a reasonable examination, the principle caveat
emptor does not apply
5. Usage of trade: Proof of reasonable usages of trade may also establish an
implied condition as to the quality or fitness of goods for a particular
purpose.
PERFORMANCE OF CONTRACT OF SALE (Sec. 32)
After the formation of a valid contract of sale, the next stage is its performance.
The term ‘performance’ of the contract of sale may be defined as the performance of
the respective duties of the seller and buyer as per the terms of the contract. Thus the
performance of the contract of sale comprises the two parts, namely:
(a) Seller’s duty to deliver the goods
(b) Buyer’s duty to accept the goods and pay the price.
As per sec. 32 of the Sale of Goods Act, the delivery of goods and the payment
of price are concurrent conditions ie., the seller should be ready and willing to deliver
the goods to the buyer, in exchange for price. And the buyer should be ready and
willing to pay the price to the seller in exchange for the possession of the goods.
Delivery go Goods
The term ‘delivery of goods’ may be defined as the voluntary and lawful
transfer of the possession of goods from one person to another. In the case of sale of
goods, the delivery should be ‘voluntary’ and it should have the effect of putting the
goods in the possession of the buyer. Where a person steals the goods of another or
takes the goods by force or fraud, there is no delivery of goods to such person.
Modes of Effective Delivery of Goods
The different modes of effective delivery of goods may be discussed under the
following heads:
1. Actual Delivery: The term ‘actual delivery’ may be defined as the delivery
where the goods are handed over by the seller to the buyer or his authorised
agent. When the goods are physically put in possession of the buyer, the
delivery is said to be ‘actual’.
2. Symbolic Delivery: When the goods are not physically delivered to the buyer
but are delivered by indicating or giving a symbol, the delivery is said to be
‘symbolic’. The delivery of the keys of the godown in which the goods are
lying, the transfer of documents of title to good etc. are the examples of
symbolic delivery. Such type of delivery is made when the goods are bulky or
incapable of actual delivery.
 3. Constructive Delivery or Delivery by Attornment: ‘Constructive delivery may
be defined as the delivery when a third person, in possession of the goods,
acknowledges to hold the goods on behalf of the buyer.

Rules Regarding Effective Delivery of Goods (Sec. 33 to 38)

1. Possession of goods: Delivery of goods may be made in any of the modes
discussed above. But it must have the effect of putting goods in the possession
of the buyer or his authorised agent. Thus, the delivery of goods should be
such which enables the buyer to exercise his control over the goods.
2. Demand for delivery of goods: The buyer must make a demand to the seller
for the delivery of the goods to him. Only then the seller becomes liable to
deliver the goods to the buyer. The parties may, agree otherwise, ie., it may be
agreed that the seller shall deliver the goods without any demand by the buyer.
3. Place for the delivery of goods: The place for delivery of goods may be
specified in the contract itself. And where the place is so specified, the goods
must be delivered at such place during the business hours and on a working
day. But where no place is specified in the contract, then following rules,
contained in sec 36(1), shall apply:
(a) In the case of sale, goods sold are to be delivered at the place where they
are, at the time of sale:
(b) In the case of agreement to sell, goods are to be delivered at the place where
they are, at the time of agreement to sell.
(c) If at the time of agreement to sell, the goods are not in existence they are to
be delivered at a place where they are manufactured or produced.
4. Time for the delivery of the goods: The time for the delivery of goods may
be specified in the contract itself. If the time is so specified, the delivery is to
be made by the seller within the specified time. Where no time is specified in
the contract, then the delivery of the goods must be made within a reasonable
time.
5. Time for the demand: The buyer must demand the delivery of goods at a
reasonable hour and the seller must also deliver the goods at a reasonable hour.
6. Goods in the possession of a third person: At the time of sale if the goods
are in the possession of the third person, the effective delivery takes place when
such person acknowledge to the buyer, that he holds the goods on buyer’s
behalf. If may be noted that the requirements of the effective delivery is that,
the third person must inform the buyer that he holds the goods on his behalf.
Where the goods are sold by transfer of documents of title to goods, the
effective delivery of goods takes place on the transfer of documents of title.
7. Expenses for the delivery of goods: The expenses of putting the goods into
deliverable condition are borne by the seller and the expenses of receiving the
goods are borne by the buyer.
8. Part delivery of goods: Sometimes, during the process of delivering the
whole lot of goods, a part of delivery is made by the seller. This is generally
 done when huge quantity of goods is to be delivered. In such cases, the
following rules shall apply:
(a) Where a part delivery is made in progress of the whole delivery, then it is
treated as delivery of the whole, and ownership of the whole quantity is
transferred to the buyer.
(b) Where the part of delivery is made with the intention of separating it from
the whole, then it is not treated as a delivery of the whole.
9. Delivery of the wrong quantity (sec. 37): The term ‘wrong quantity’ may
include short delivery or excess delivery of goods than the agreed quantity. It
also includes the delivery of agreed quality goods mixed with another quality.
The rules dealing with the effect of delivery of wrong quantity may be
discussed under the following heads:
(a) Short delivery: If the seller delivers a less quantity of goods than he
contracted to sell, the buyer may reject the goods. However, the buyer may
also accept the short quantity and pay at the contract price for the goods
actually delivered to him.
(b) Excess delivery: If the seller delivers a large quantity of goods than he
contracted to sell, the buyer may exercise any of the following options:
1. He may accept the contract quantity and reject the rest.
2. He may accept the whole of the goods and pay for all goods at the
contract rate.
3. He may reject the whole quantity of goods.
(c) Mixed Delivery: If the seller delivers goods mixed with the goods of a
different description, the buyer may exercise any of the following options:
1. He may accept the goods which are in accordance with the contract and
reject the rest.
2. He may reject the whole goods.
10. Delivery of goods by instalment (sec. 38): As a matter of fact, the delivery
of goods by instalments is not considered as a good delivery and the buyer is
not bound to accept the goods delivered to him by instalments, unless
otherwise agreed.
11. Delivery to a carrier or wharfinger (sec.39): Sometimes, the sold goods are
delivered to a carrier for the purpose of transmission to the buyer, then the
delivery of goods to a carrier is treated as a delivery to the buyer.
Similarly, where the sold goods are delivered to wharfinger for the purpose of
safe custody, the delivery of goods to the whatfinger is also treated as delivery
to the buyer.
12. Deterioration of goods during transit (sec. 40): Sometimes, the seller agrees
to deliver the goods, at his own risk, at a place other than that where the goods
are lying at the time of contract of sale. In such a case, the buyer shall bear the
loss of deterioration of goods which is incidential or natural in transit.
13. Buyer’s right to examine the goods (sec. 41): Where goods are delivered to
the buyer, who has not previously examined them, the buyer is entitled to a
reasonable opportunity of examining the goods in order to ascertain whether
 they are in conformity with the contract. Unless otherwise agreed, the seller is
bound, on request, to afford the buyer a reasonable opportunity of examining
the goods.

UNPAID SELLER
The term ‘unpaid seller’ may be defined as the seller to whom the full price of the
goods sold has not been paid. Section 45 of the sale of Goods Act lays down that a
seller is an unpaid seller where:
1) The full price of goods sold has not been paid or tendered.
2) A conditional payment is made by a bill of exchange or other negotiable
instrument which has been dishonoured, ie., the buyer failed to pay the amount
on maturity of the instrument.
Thus, a seller who has not received the price of the goods sold or has received
only a part of the price is an unpaid seller. However, a seller is not an unpaid seller if
the buyer has offered to pay the price, but the seller has refused to accept it. In such a
case, the seller loses all the right of an unpaid seller.
When payment is made by a negotiable instrument, it is conditional payment.
The condition being that the instrument shall be duly honoured. If the instrument is
not honoured, the seller is deemed to be an unpaid seller.
‘Seller’, here means not only the actual seller, but also any person who is in the
position of the seller. For instance, an agent of the seller to whom a bill of lading has
been endorsed, is in the position of a seller and may exercise the right of unpaid
seller.
Rights of an unpaid seller
Under the Sale of gods Act, the unpaid seller has the following two rights:
I. Right against goods sold
II. Right against the buyer.

I. Right against goods sold

Unpaid seller’s rights against the goods sold are the following:
II. Where the ownership of the goods has transferred to the buyer
In this case, the unpaid seller has the following rights:
a. Rights of Lien (sec. 47(1): Right of lien is the right to retain the
possession of the goods. An unpaid seller has the right to retain the
goods in his possession and refuse to deliver them to the buyer until the
full payment of the price is made to him or the price is offered to him.
The right of lien can be exercised by the unpaid seller if the following
conditions are satisfied.
1) The unpaid seller must be in actual possession of the goods sold.
 2) The unpaid seller can retain the goods only for the payment of the
price of the goods. He can not retain the goods for any other
changes.
3) Where goods are sold without any stipulation as to credit, ie., in case
of cash sales; the unpaid seller can retain the goods if the buyer fails
to pay the whole price
4) Where the goods are sold on credit, the unpaid seller can retain the
goods if the buyer fails to pay the whole price after the expiry of
credit period.
5) Where the buyer becomes insolvent, the unpaid seller may retain the
goods until the whole price is paid.
6) Where the unpaid seller has delivered a part of the goods, he may
exercise his lien on the remaining part of the goods.
7) The unpaid seller cannot be compelled to deliver a part of the goods
on payment of proportionate price of the goods.
b. Right of stoppage of goods in transit (Sec. 50): The term ‘stoppage in
transit, i.e., in the stopping of the goods while they are in the course of
transit, ie., in the course of transmission to the buyer. Where the unpaid
seller has parted with the possession of the goods, then his lien is lost.
But in certain circumstances, the unpaid seller can stop the goods in
transit and prevent them from reaching into the buyer’s possession until
the price is paid.
This right is contained in section 50 of the Sale of Goods Act, which
provides that where the buyer becomes insolvent and the unpaid seller
has parted with the possession of the goods, he can stop the goods in
transit until the whole price is paid.
The unpaid seller can exercise the right of stoppage of goods in transit,
if the following conditions are satisfied.
1) The buyer has become insolvent.
2) The seller must be unpaid, the unpaid seller can stop goods in transit
only for the payment of price of the goods.
3) Seller must have parted with the possession of the goods.
4) The goods are in the course of transit, ie., the goods have gone out of
the actual possession of the seller. But they have not reached in the
possession of the buyer.
c. Right of Re-sale (sec. 54 (2): Unpaid seller’s right of resale is contained
in Sec. 54(2) of the Sale of Goods Act, which provides that if the buyer
fails to pay or offer the price within a reasonable time, the unpaid seller
has the right to resell the goods in the following circumstances:
1. When the goods are of a perishable nature: Sometimes, the goods
are of a perishable nature and the buyer fails to pay the price within a
reasonable time. In such cases, the seller can resell the goods to
some other person, within in a reasonable time. The term
‘reasonable time’ in a question of fact in each case.
 2. Where the unpaid seller has exercised his right of lien or right of
stoppage in transit and gives a notice to the buyer of his intention to
resell the goods: The unpaid seller has the right to resell the goods
to another person, if he has exercised the right of lien or stoppage in
transit. In this case, he should give a notice to the buyer of his
intention to resell the goods. Even after the receipt of such notice,
the buyer does not pay or tender the price within a reasonable time,
the seller may resell the goods. In such cases, on the resale of the
goods, the seller is entitled to:
(a) Recover the difference between the contract price and resale
price, from the original buyer, as damages.
(b) Retain the profit, if the resale price is higher than the contract
price.
3. Where the seller expressly reserves his right of resale: Sometimes,
it is expressly agreed between the seller and buyer that in case the
buyer makes default in payment of the price, the seller will resell the
goods to some other person. In such cases, the seller is said to have
reserved his right of resale, and he may resell the goods on the
default of buyer. In this case, the seller is not required to give notice
of resale to the buyer.
B. Where the ownership of the goods has not transferred to the buyer or Right of
Withholding Delivery (Sec. 46(2):
Sometimes, the ownership of the goods sold is not transferred to the buyer,
then the unpaid seller has the right of withholding the delivery of goods, if the buyer
fails to pay the price.
It means that the unpaid seller may refuse to deliver the goods to the buyer and
seller will not be liable for damages for non-delivery of goods until the price is paid or
tendered.
It may be noted that the right of withholding delivery is in addition to other
remedies available to the seller. This right is similar to and co-extensive with the
right of lien and stoppage of goods in transit.
III. Right against the buyer
Unpaid seller has the following rights against the buyer.
a. Suit for price (Sec. 55)
Where the buyer fails to pay the price of the goods in terms of the
contract, the seller can file a suit against buyer for the recovery of the price.
b. Suit for damages for non-acceptance of goods (Sec. 56)
When the seller is ready and willing to deliver the goods to the buyer,
but the buyer wrongfully neglects
c. Suit for damages for repudiation of the contract before the due date of delivery
of goods (Sec. 60)
 Where the buyer repudiates (ie., puts an end to) the contract before the
due date of delivery of the goods, the seller has the following options:
a) He may not immediately take an action against the buyer and wait to
till the date of delivery of goods.
b) He may immediately treat the contract as repudiated and bring a
legal action against the buyer for the recovery of damages.

d. Suit for interest (sec. 61 (2) (a))

When there is a specific agreement between the seller and buyer as to
interest on the price of the goods from the date on which payment becomes
due, the seller may file a suit against the buyer for the recovery of interest.

Questions
Short answer question (2 marks)
1. Define ‘goods’ under Sale of Goods Act.
2. What is ‘existing goods’?
3. What is ‘specific goods’?
4. What is ‘ascertained goods’?
5. What is ‘future goods’?
6. What is ‘Contingent goods’?
7. What is ‘Coveat Emptor’?
8. What is ‘symbolic delivery’?
9. What is ‘Constructive delivery’?
10. Who is an unpaid seller?
Short answer question (5 marks)
1. Distinguish between sale and agreement to sell.
2. Explain the differences between condition and warranty.
3. What is coveat emptor? What are the exceptions?
4. ‘Risk passes with the ownership’. Explain.
5. Explain the rule of ‘Nemo dat guod non habet’. What are its exceptions?
6. Explain the rules regarding effective delivery of goods.
Essay question (20 marks)
1. What is contract of sale? What are the essentials of a valid contract of sale.
Distinguish between sale and agreement to sell.
2. Define condition and warranty. Discuss implied conditions and warranties
under Sale of Goods Act.
3. Who is an unpaid seller? What are the rights of an unpaid seller against (a)
Goods and (b) Buyer personaly.