Unit 3

SALE OF GOODS ACT, 1930

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Chapters
1. Contract of Sale of Goods
2. Conditions and Warranties
3. Transfer of Ownership in Goods
4. Performance of Contract of Sale
5. Rights of an Unpaid Seller

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 Chapter 1
Contract of Sale of Goods

• The act came into force on 1st July 1930 and extends to the whole of
India. It consists of Seven Chapters and 66 sections. It was earlier a
part of Indian Contract Act, 1872 – Sections 76-123.
• The general provisions of the Indian Contract Act, 1872 are applicable
to the contract of sale of goods unless they are inconsistent with the
express provisions of the Sale of Goods Act, 1930.

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Meaning of Contract of Sale of Goods
• Section 4(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.”
• Section 4(2) – A Contract of Sale may be ABSOLUTE or CONDITIONAL.
a) Sale or Absolute Sale
Where the property in goods is immediately transferred from the seller to
the buyer, the contract is called ‘Seller’. (WOOD vs MANLEY, 1839)
b) Agreement to Sell or Conditional Sale (Section 4(3))
Where the transfer of property in goods is to take place at a future date or
subject to the fulfilment of certain conditions.
Section 4(4) says that an agreement to sell becomes a sale when the time
elapses or the conditions, subject to which the property in the goods is to be
transferred are fulfilled.
(JOHNSON vs MECDONALD, 1872)
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Essential Elements of a Contract of Sale
1. Two Parties (Buyer and Seller)
2. Goods
Section 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 the land which are
agreed to be severed before sale or under the contract of sale.
For Example, Trademarks, Copyrights, Goodwill, Growing Crops, Live Stock
and so on are all goods.
3. Price
4. Transfer of Property in Goods
5. Essential Elements of a Valid Contract
6. Mode of Formation
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 Classification of Goods

Existing Goods Future Goods Contingent Goods

Specific Goods Ascertained Unascertained

or Goods Goods

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Effect of Perishing of Specific Goods
1. Goods perishing before making the contract of Sale (Sec 7)
The contract is VOID if the goods without the knowledge of the seller
have, at the time when the contract was made, perished or damaged.

2. Goods perishing before Sale but after Agreement to Sell (Sec 8)

The agreement can be avoided if the goods without any fault of buyer
or seller, perish or gets damaged after entering into an agreement to
sell.

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Ascertainment of Price
1. Modes of ascertaining the Price (Sec 9)
i. Expressly stated in the contract
ii. Fixed in the manner provided by the contract
iii. Determined by the course of dealing between the parties
iv. A reasonable price

2. Valuation by Third Party in case of Agreement to sell (Sec 10)

i. Agreement to sell becomes VOID if third party fails to do the price valuation.
However, if some goods are already delivered to or used by the buyer, he will
have to pay the reasonable price for the same.
ii. Where third party is prevented to do the valuation by the fault of seller or
buyer, the party not in fault may maintain a suit for damages against the party
in fault.
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Stipulations as to TIME (Sec 11)
1. Stipulation as to Time of Payment
Time of payment, in general is not deemed to be the essence of contract and
therefore, even if price is not paid on time by the buyer, the seller cannot
avoid the contract. The seller needs to deliver the goods if buyer pays the
price within a reasonable period before the re-sell of goods. However,
compensation can be claimed for the loss due to buyer’s failure to pay on
time.

2. Stipulation as to Time of Delivery

Here, time is the essence of the contract and contract can be avoided by the
buyer if seller makes a delay in delivery beyond the time fixed for delivery
under the contract.
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 Difference between Sale and Agreement to Sell

Basis Sale Agreement to Sell

1. Transfer of
Property in Immediately transferred from Seller to Transferred at some future date from the
Buyer at the time of Contract. Seller to the Buyer.
Goods

2. Type of
Goods Existing (Specific and Ascertained) Goods Unascertained, Future and Contingent
Goods

• Executed Contract – where transfer of Executory Contract – Bilateral where

property and delivery of goods takes place performance is yet to be completed.
simultaneously.
3. Nature of
• Executory Contract – Unilateral if
Contract consideration is pending on the part of Buyer.

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 Difference between Sale and Agreement to Sell

Basis Sale Agreement to Sell

4. Risk of Loss to be borne by the Buyer even if Loss to be borne by the Seller even if
Loss goods are in possession of seller. goods are in possession of seller.

5. Conseque Seller can sue for the price even though Seller can only sue for damages.
nces of the goods are in his possession.
Breach by
Buyer

Seller cannot re-sell the goods. If he does If the seller re-sell the goods, the
so, the subsequent buyer does not subsequent buyer who takes the goods for
acquire good title to the goods. The consideration and without notice of prior
6. Right to Original buyer has double remedy, suit agreement, gets a good title and original
for damages against the seller and buyer can only sue for damages.
Re-sell recovery of goods from the third party.
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 Difference between Sale and Agreement to Sell

Basis Sale Agreement to Sell

7. Nature of Right in rem Right in Personum
Buyer
Rights
If buyer becomes insolvent before paying If buyer becomes insolvent before paying
8. Insolvency the price for the goods, the seller in the the price for the goods, the seller may
of Buyer absence of Right of Lien over the goods, refuse to deliver the goods to the official
must deliver the goods to the Official receiver.
Receiver. He can only claim the
proportionate Dividend for the Price due.

If seller becomes insolvent, the buyer will If Seller becomes insolvent and buyer has
be entitled to recover the goods from the paid the price, he can claim only
9. Insolvency official receiver, as he is the owner of proportionate dividend and not the goods
goods. because the property in them has not yet
of Seller passed to him.
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 Chapter 2
CONDITIONS and WARRANTIES

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• Every Contract of Sale usually contain a number of Stipulations or terms or
statements regarding the nature and quality of goods, the price, the time and
place of delivery and so on. Not all stipulations carry the equal importance.
• Section 12(1) defines Stipulation as:
“A Stipulation in a contract of sale with reference to goods which are subject matter
thereof, may be a Condition or a Warranty.”
• Section 12(2)
“A Condition is a stipulation essential to the main purpose of the contract, the
breach of which gives rise to a right to treat the contract as repudiated.”
(BALDRY vs. MARSHALL, 1925)
• Section 12(3)
“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 is repudiated.”
• Section 12(4)
“Whether a stipulation in a contract of sale is a condition or a warranty depends in
each case on the construction of the contract. A stipulation may be a condition
though called a warranty in the contract.”
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When can a Condition be treated as a Warranty?
1. Voluntary Waiver by the Buyer
2. Acceptance of Goods by the Buyer

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 Express Conditions

Types of Conditions
Implied Conditions
• Implied Conditions
1. Condition as to Title (Sec 14(a))
Niblett vs Confectioners Material Company, 1921 “NISSLY”

2. Condition in a Sale by Description (Sec 15)

“If you contract to sell Peas, you cannot oblige a party to take beans.”
a) Where the buyer has never seen the goods and relied on seller’s description.
(Acros vs Ranason & Sons, 1933)
b) Where the buyer has seen the goods but he relies on what he has been stated
or described and not what he has seen. (Nicholson and Venn vs. Smith
Marriott, 1947)
c) Sometimes, packing of goods also form part of description.

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3. Condition in a Sale by Sample (Sec 17)
4. Condition in a Sale by Sample as well as by Description (Sec 15)
(Nichol vs Godts, 1854)
5. Condition as to Quality or Fitness (Sec 16(1))
(Griffiths vs Peter Conway Ltd., 1939)
6. Condition as to Merchantability (Sec 16(2))
(Morelli vs Fitch and Gibbons, 1928)
7. Condition as to Wholesomeness
(Frost vs. Aylesbury Dairy Co. Ltd., 1905)

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 Express Warranties

Types of Warranties
Implied Warranties

• Implied Warranties
1. Warranty as to Quite Possession (Sec 14(b))
(Mason vs Burnigham, 1949)
2. Warranty as to Freedom from Encumbrances (Sec 14(c))
3. Warranty to disclose the Dangerous nature of the goods.
(Clarke vs. Army and Navy Co-operative Society Ltd., 1903)

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Doctrine of Caveat Emptor (Exceptions)
1. Fitness for Buyer’s Purpose
2. Goods sold by Misrepresentation
3. Goods purchased by Description
4. Goods purchased by Sample
5. Goods purchased by Sample as well as Description
6. Merchantable Quality
7. Condition implied by Trade Usage

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 Chapter 3
Transfer of Ownership in Goods

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Legal Consequences of Transfer of Property in Goods

a) Risk follows Ownership (Sec 26)

b) Action against third parties
c) Suit for Price
d) Insolvency of the Seller and the Buyer

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Essentials of a Valid Transfer/
Rules regarding the Transfer of Property
a) Identification of the goods (Sec 18)
b) Intention of the parties (Sec 19)
If the intention of the parties as to the time when the property in goods is to
pass to the buyer cannot be ascertained from the contract, the rules contained
under section 20 to 24 are applicable.

These rules deal with three different situations:

1. Sale of Specific Goods (Sec 20 to 22)
2. Sale of Unascertained Goods (Sec 23)
3. Sale of Goods on Approval basis (Sec 24) (ELPHICK vs. BARNES, 1880)

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1. Sale of Specific Goods (Sec 20 to 22)
a) When goods are in deliverable state (Sec 20)
b) When goods needs to be put in a deliverable state (Sec 21)
(RUGG vs MINETT, 1809)
c) Where the price of the goods is to be ascertained by weighing, etc. (Sec 22)

2. Sale of Unascertained Goods (Sec 23)

Two pre-conditions for the transfer of property in case of unascertained goods:
a) “Ascertainment” of Goods
b) Their unconditional “Appropriation” to the contract.
(LANGTON vs. HIGGINIS, 1858)

*Delivery to Carrier (Sec 23(2))

*Reservation of Right of Disposal (Sec 25)

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Transfer of Title by Non - Owners
General Rule –
• “No one can give what he has not got”
• “No one can pass a better title than he himself has”
• “Nemo dat Quod non-habet”

This rule is to protect the Owner of the Goods.

LEO vs. BAYES (1856)

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EXCEPTIONS
1. Transfer of Title by Estoppel (Sec 27)
2. Sale by a Mercantile Agent (Sec 27) (FOLKES vs. KING, 1923)
3. Sale by Joint Owner (Sec 28)
4. Sale by a person in possession under a Voidable contract (Sec 29)
5. Sale by a person in possession after Sale (Sec 30(1))
6. Sale by a Buyer in possession after having bought or agreed to buy
goods (Sec 30(2)) (LEE vs. BUTLER, 1853)
7. Sale by an Unpaid Seller (Sec 54(3))

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EXCEPTIONS under other Acts
1. Sale by Finder of lost goods under certain circumstances (Sec 169 of
Indian Contract Act, 1872)
2. Sale by a Pawnee or Pledgee under certain circumstances (Sec 176
of Indian Contract Act, 1872)
3. Sale by an official receiver or official assignee or liquidator of the
company.
In all the above cases, if the seller, even though he is not the owner of
the goods, sells the goods, the buyer gets a good title.

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 Chapter 4
Performance of Contract of Sale

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Two Concurrent Conditions (Sec 32):
1. Delivery of Goods
2. Payment of the Price

MODES of effective delivery of Goods:

1. Actual or Physical Delivery
2. Symbolic Delivery
3. Constructive Delivery

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Rules of Effective Delivery of Goods
1. Mode of Delivery (Sec 33)
2. Delivery of Goods and Payment of Price are the two concurrent conditions (Sec 32)
3. Effect of Part Delivery (Sec 34)
4. Buyer should apply for delivery (Sec 35)
5. Place of Delivery (Sec 36(1))
6. Time of Delivery (Sec 36(2) and (4))
7. Delivery of goods in possession of third party (Sec 36(3))
8. Expenses of Delivery (Sec 36(5))
(PHILIPS vs. BLAIR & MARTIN (1801))
9. Delivery of Wrong Quantity (Sec 37)
(Short Delivery, Excess Delivery and Mixed Goods)
10. Delivery of goods in instalments (Sec 38) (RICHARDSON vs. DUNN, 1841)
11. Delivery to a Carrier or Wharfinger (Sec 39)
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• Right of Buyers for examining the goods (Sec 41)
(HARDY & Co. vs. HILLERS & FOWLERS, 1923)

• Liability of Buyer for rejecting, neglecting or refusing to take the

delivery of Goods
a) Buyer’s liability in case of Rejection of Goods (Sec 43)
b) Buyer’s liability for neglecting or refusing to take delivery of goods
(Sec 44)

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 Chapter 5
Rights of an Unpaid Seller

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 Rights of an Unpaid Seller

1. Against the Goods 2. Against the Buyer

1.1 Where the Property in 1.2 Where the Property in 2.1 Suit 2.2 Suit for 2.3 Repudiation 2.4 Suit for
goods has passed to the goods has NOT passed to for Price Damages of Contract Interest
Buyer (Sec 46(1)) the Buyer (Sec 46(2)) (Sec 55) (Sec 56) (Sec 60) (Sec 61)

1.2.1 Right to withhold

1.1.1 Right of Lien
Delivery
(Sec 47 to 49)
1.1.2 Right of Stoppage
in Transit (Sec 50 to 52)

1.1.3 Right of Re-Sale

(Sec 54)
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 Right of Lien – To RETAIN the Possession
Circumstances under which an unpaid seller may exercise his Right of Lien:
a) Where the goods have been sold without any stipulation as to credit
b) Where the goods have been sold on credit, but the term of credit has expired
c) Where the Buyer becomes Insolvent (Even though period of credit has not
expired)

*Unpaid Seller’s Right of Lien is POSSESSORY LIEN.

*Part Delivery (Sec 48)

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When is the Right of Lien lost? (Sec 49)
1. When goods are delivered to a carrier or other Bailee for the
purpose of transmission to the buyer, without reserving the right of
disposal of the goods.
(VALPY vs. GIBSON, 1847)
2. The buyer or his agent lawfully obtains the possession of the goods.
(KNIGHTS vs. WIFFEN, 1870)
3. When the Unpaid seller waives his right of lien on the goods. The
waiver may be Express or Implied.
4. When the buyer tender the price and the seller refuses to accept.

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Right of Stoppage in Transit - To REGAIN the Possession
Conditions to be satisfied if an unpaid seller want to exercise his Right of
Stoppage in Transit:
a) The seller must be Unpaid, wholly or Partly
b) The Buyer must have become Insolvent
c) The goods must be in Transit (Sec 50)

*Duration of Transit (Sec 51)

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When does Transit come to an end?
a) When the buyer or his agent lawfully obtains the possession before their
delivery at the appointed destination.
b) When the carrier or other bailee acknowledges to the buyer or his agent
that the goods are arrived at the appointed destination.
c) Where the carrier or other bailee wrongfully refuses to deliver the goods
to the buyer or his agent.
d) Where the goods have arrived at the appointed destination and the
buyer further directs the carrier to deliver them to some other
destination.
e) Where part delivery is made in circumstances to suggest the delivery of
the whole.

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How the Right of Stoppage in Transit is
exercised? (Sec 52)
a) By taking actual possession of the goods.
b) By giving notice of his claim to the carrier or other bailee (Principal
or his agent) in whose possession goods are.

Personal Liability of Carrier

a) If he wrongfully delivers the goods to the buyer or refuses to deliver
them back to the seller.
b) If he wrongfully delivers the goods to the seller after the transit has
ended.

*Effect of Sub-sale or Pledge by the Buyer (Sec 53)

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 Right of Re-Sale (Sec 54)
Circumstances under which an unpaid seller may exercise his Right of
Resale:
a) Where the goods are of Perishable nature
b) Where he has exercised his Right of Lien or Stoppage in Transit but
failed to get the price from the buyer, he may give a notice to the buyer
signifying his intention to resell the goods.
c) Where he expressly reserves a right of resale of the goods, in case the
buyer makes a default.

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