Updated: Thursday January 14, 2010/AlKhamis Muharram 29, 1431/Bruhaspathivara Pausa 24, 1931, at

07:00:47 PM

Course Contents: Entire Act.

The Sale of Goods Act, 1930, extends to whole of Pakistan. Since it is federal law, therefore it is followed in all
parts of Pakistan. It relates to moveable goods, such as, fan, book, table, chair, car etc. All goods, which are
moveable, can be carried out from one place to another. Where the transfer of goods takes place in a way of
sale, there the Sale of Goods Act, 1930, applies. There are many ways whereby contract of sale can be made.
They may either be verbal, written, or implied. Purchase of pen for Rs. 50/ is a verbal contract. Everything is
not written. If a person gives me Rs. 50/ and takes my pen and I accept price of pen, is called implied contract.
I purchase a book, take it to home, open and find some papers missing or binding is out of order I may return it
to get my money back or replace it. Merchantable quality must contain its commercial value. Perished items
have no commercial value like perish milk. Seller and buyers are bound to follow rights and obligations, which
are provided in contract. Rights and duties either provided or not in any contract, the Sale of Goods Act, 1930,
applies in all circumstances. Contract of pledge may take place verbally and if breach of contract is committed,
it can be sued. Pawnee has right to sell the goods of pawner in order to recover his credit and expenses for the
proceeding of sale. This right even is not provided in contract but Contract Act, which is a statue, gives him
such right. Formation of sale of goods contract has two kinds, i.e., contract of sale and agreement to sell.
Where a sale proceeds happens immediately and goods are delivered at once that is called contract of sale.
Where transfer of goods takes place in future time, which is subject matter, is called agreement to sell. After
compliance, agreement to sell is converted into contract of sale.

Essential requirement of sales is offer from buyer or seller, consideration, acceptance, delivery of goods at once
or in installments. Goods may be either existent goods or possessed or future goods.

Condition: Contract has certain conditions, which are to be fulfilled by all the parties. Also there are some
warranties. These are called stipulations. Condition is necessary part of the contract and its breach renders
contract invalid. It is fundamental of contract. Its breach produces legal consequences.

Warranty: It is also a stipulation but is not fundamental. Its breach neither creates any legal consequences nor
defeats contract and purpose of contract is served.

Condition and Warranty distinguished: Breach of condition arises legal consequences and renders contract
invalid. Other party may terminate contract. He can claim damages.

Warranty is secondary point. If it breaches, right of compensation arises, but does not redder contract invalid.
If the goods purchased are not in accordance with the specification of the contract, it is condition and contract
is liable to terminate, but if goods are likely to be ordered and there is just a defect, it is warranty and other
party may claim damages. Contract cannot be terminated. There is only one condition in which upon breach of
warranty, contract can be terminated. Contract is liable to terminate by seller upon breach of warranty
provided seller could neither repair nor replace the goods, which are defective.

For example, 100 chairs for Computer College are ordered. Chairs provided by contractor are not as per
requirements and purpose is not served, it is condition and contract is liable to terminate. But if the chairs serve
the purpose but color of the chairs is not according to contract, it is warranty and damages can be claimed.

Condition can be treated as warranty if buyer waives his right.

It is obligation of seller to provide opportunity to buyer to inspect the goods, he is intended to buy. If the
opportunity to inspect the goods for quality and quantity is not provided by the seller to buyer and goods are
found defective, seller is liable to compensate buyer. If seller provides opportunity to buyer and goods found
defective, only damages can be claimed. If opportunity is not provided and goods found defective, contract
may be terminated. If party accepts delivery of goods, and then it is warranty, otherwise condition.
If the stipulation is condition but law of land deals it as warranty, then it will be warranty.

Sale can be offered by three ways in addition of one more way:

1.Sale by sample: In this instance, sample of product is shown to buyer and order is collected/obtained. For
example, a seller of fan in Gujrat may show sample of fan to buyer in Lahore. Seller is under obligation to
provide goods according to sample.

2.Sale by description: In this case, specification of goods is provided to buyer and no physical good is shown
to him.

3. Sale by both: Sample alongwith description, both are provided. Sale may vary from the sample shown
because of description.

4.There is another way of sale. It is sale by approval. In this instance goods are delivered to party to inspect
and decided for purchase. If party disapproves, sale is not happened. Expenses of delivery and retaking
will be borne by seller. If buyer disapproves sale not within specified or reasonable time, buyer will be
responsible. If buyer disapproves, and goods are damages without negligence and fault of buyer, seller will
remain responsible.

Goods cannot be sold ownership of which is not passed on to buyer by seller. By this process buyer becomes
owner and he acquires title and seller loses the ownership over property. Property is not transferred until the
title over property is not transferred. Stolen goods cannot be transferred being the absence of title. Possession is
insufficient to have title. Transfer of goods and title, are two different things. Goods are passed on when seller
loses control over goods and buyer acquires control over them. Transfer of subject matter is passing on of
property in goods and control of seller is lost.

Who is subject of risk or loss when goods sold are in transit? Goods may be damaged before passing on, after
passing on, and while transit. Who will be responsible if loss is occurred? It depends on the situation whether
property in goods which is subject matter, has been passed on. As soon as seller loses control over goods, it
completes the process of passing on.

There are certain steps in passing on property in goods. For example, order to buy 500 kilo gram wheat does
not constitute passing on until specific wheat is separated from bulk. There may be bags of 50 kg., each. If bags
are to be bought, then they must be separated. If the goods are likely to be assembled, they must be assembled,
and if packing is necessary to give it deliverable form, it must take place.

1.Ascertainment of goods must be assured before passing on goods. Goods must be separated.

2.Specific goods are not required to be ascertained.

3.Goods must be in deliverable form before passing on. Packing, assembling, polishing furniture are different
kinds of deliverable form.

4. Parties must be intended in passing on at particular date and time. If date and time is specified, then
passing on completes even if goods are not transferred.

If the goods are perished before passing on, seller is responsible, if perished after delivery, buyer is
responsible for loss. When specific date and time comes, passing on is considered takes place.

5. If goods are brought through carrier or porter, who will bear loss, if occurred? As a general rule, when
goods passes on, risk also passes on. But it depends on situation. If buyer hires the carrier then risk is
responsibility of buyer. Normally buyer gets goods insured to cover risk. If dispatch of goods is
responsibility of seller at the doorstep of buyer, then risk lies on seller. Damage by porter is also dealt by
this principle.
As soon as buyer acquires the control over property in goods and seller loses his control over the same, passing
on takes place. How the title is transferred from seller to buyer? In mortgages, pledges, bailment, title of
ownership does not transfer, but only possession transfers. As general rule goods cannot be transferred until
the seller thus passing acquires the possession on does not take place in absence of possession. Some time
buyer purchases the goods, which are not in possession of seller, thus he has no title, but even than under
special circumstances, title transfers to buyer. Such exceptions are as below:

1.If a principal has not a particular person being an agent but his conduct shows a particular person acting as
an agent. A third party deals with an agent. Contract is made between buyer and principal and principal
will remain responsible for the transfer of title. Law of estopal will come into operation to stop him in
deviation.

2. A mercantile agent is an agent who has goods in his possession related to his principal. He can pledge
goods with the consent of his principal. If conduct of a principal shows a particular person as his mercantile
agent, and third party deals with an agent, title will be transferred and principal will face consequences.

3.There may be several joint owners in any business. They act as an agent of each other and can transfer title
upto extent of their share. If joint owners give authority to one joint owner and he sells property, title,
which is acquired, will be transferred.

4.A sell fan to B, under voidable contract, which is not known, to B at the time of sale, title will be transferred
even if contract becomes void. A is liable to pay damages to actual owner. B will not be responsible in this
case.

5.A seller sells a thing to another person and receives price and buyer did not take possession and goods rest
there in shop or sellers premises, it means possession is not transferred. Buyer should be very careful and
he should, at least, take the documents containing title. It is a general rule that law regards possession. As
matter of rule, seller cannot resell sold things. But if he resells and possession and title is transferred to
third person, then law regards possession and protects interest of possessor. However first buyer can claim
damages, but he cannot acquire possession.

Performance of contract is delivery of goods. If seller fulfills all the terms and conditions of sale agreement and
delivers goods to buyer as contractual responsibility. It is duty of buyer that he should accept the goods
delivered to him.

There may be concurrent sale, means delivery of goods and receipt of payment takes place in a time. In this
instance there is no breach of contract. But in many cases, breach of contract may take place like in instances of
credit sale, advance sale, sale in installments. If contract is silent regarding criteria of breach, then S. 32 will
apply. Seller is duty bound to deliver goods as provided in mutual agreement. Where agreement is silent
whether where the goods are to be supplied, buyer has to inform to seller whether where delivery of goods be
made. If place of delivery of goods is part of contract, then seller is bound to deliver goods at the requisite
place. In contrast, seller is not bound to deliver goods as buyer wishes, he is responsible upto the extent of his
premises. Buyer cannot appoint another point to deliver goods other than agreed.

Delivery of goods should be made as agreed in contract, otherwise reasonable time must be adhered. Seller is
responsible for loss, if occurs, if he send goods through his an agent for loss, if occurred.

Possession of goods placed in cold storage or godown can be changed if change of possession is
acknowledged to cold storages owner.

Delivery of goods must take place within reasonable hours, if no provided in contract.

Unpaid seller: Unpaid seller is a person who has sold goods but buyer has failed to pay him price of goods. If
bill of exchange or other negotiable instruments dishonors, it also amounts unpaid selling. Goods sold on credit
are not covered under this section.
The seller of goods is deemed to be an unpaid seller within the meaning of this Act:

a.When the whole of the price has not been paid or tendered.

b.When a Bill of Exchange or other negotiable instrument has been received as conditional payment and
the condition on which it was received has not been fulfilled by reason of the dishonour of the
instrument otherwise.

In case of contract of sale, this situation does not arise, because contract is performed at spot. Passing of goods
takes place, property is transferred, title is transferred, possession is transferred, and consideration or price of
goods sold is received on spot. Since the performance of contract takes place, so matter of unpaid seller does
not take place, and he is converted into paid seller.

A sells goods to B, at Rs. 15,000/ A passes on the goods to B alongwith transfer of goods, title, and possession.
In result of such transfer B pays Rs. 15,000/ to A. This is a contract of sale so unpaid seller is not created. But if
B pays Rs. 5,000/ and withholds Rs. 10,000/ due to reasons unknown, it creates unpaid seller.

Rights of unpaid seller: Law gives following rights to unpaid seller:

1. In case, goods are sold, property in goods has passed on, goods are not delivered, and goods are lying at
the premises of seller, price is not paid, seller can establish lien over sold goods and can retain or stop
goods until the payment is received. Lien is retention of goods until the condition is fulfilled.

2. If the goods are in transit and buyer becomes insolvent then goods in transit can be retaken or stopped.
Since insolvent buyer can not pay the price of goods so law gives right to seller to retake his goods from the
possession of the buyer. U/s 11 of Contract Act, person of insolvent cannot enter into agreement until he
attains solvency.

3.Seller, can resale the goods which have been retained or stopped.

4.Where property in goods has not been passed on, seller may resale the goods.

Rights of unpaid seller to retain or stop, property in goods in transit, ends if:

1.Seller sells goods to buyer and buyer resells goods to another person.

2.Goods have been reached to the appointed destination of the buyer.

3.Perishable items lying in cold storage are the bailment, and owner of cold storage acts as bailee, and holder
of title is referred as bailor. Owner of cold storage can retain goods on the behalf of buyer or seller,
whatsoever situation is.

4. Goods have been reached at the destination where they are liable to transfer but are not transferred, ends
lien.

5.Goods are not delivered wrongfully to buyer.

6.Goods are transferred to another career wrongfully, ends lien.

How an unpaid seller can retain goods and what are consequences of retention:

1.Unpaid seller can take physical possession.

2.If career is acting on behalf of another, seller has to give notice to actual possessor or to his principal for not
reselling.
3.Reasonable time must be given to principal so that he may communicate the message to his agent.

4.If the goods of unpaid seller have been resold to third party or second party has pledged the goods, unpaid
seller can establish his lien over goods.

5. If A buy goods from Singapore and goods are sent through ship and ship is in transit, seller receives title
documents, can resale goods.

6.Reselling and/or pledge do not defeat the right of retention or stoppage.

7.If goods are resold with the consents of unpaid seller, the right of retention or stoppage becomes end.

8.Goods, which have been retained, are not liable to resell until a notice is served to buyer. In sale agreement
property in goods and title passes on. Simply retention does not mean right of selling. Retention only
creates lien over goods. If buyer is no more interested in payment of price, unpaid seller can resell goods
after serving a notice to buyer. If loss occurs from sale proceedings, unpaid seller can recover damages from
buyer. Notice should be served within reasonable time, as subject matter allows.

9.If unpaid seller sells goods without consents of buyer, buyer can recover damages.

10.Seller can sue buyer whenever he commits default in payment of price of sale.

11.If buyer refuses to accept contractual goods, seller may sue buyer for damages.

12. Buyer may sue seller for the recovery of damages where seller willfully or negligently refuses to deliver
goods.

13.If taxes are imposed at the time of delivery, price will be increased and if taxes are decreased, price will be
reduced.

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