SALES OF GOODS ACT, 1930

AMANPREET KAUR EKTA VERMA AKHIL PANCHAL MANISH MAINI

TOPICS COVERED:
Formation of contract of sales Difference between sale and Agreement to sell, Difference between sale and hire purchase, Difference between sale and bailment Bail agreement Conditions and warranties Rule of Caveat Emptor Rights of unpaid seller.

HISTORY

Sale of goods act was enacted in 1930.

Borrowed from the English act.

Came into force in July, 1930.

Prior to the act, the law of sale of goods was contained in chapter VII of the Indian contract act,1872.

FORMATION
OF CONTRACT OF SALE

DEFINITION

Sec 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of he sale of goods in the following manner:

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.

The term Contract of sale of goods is a generic term and it includes:

a. b.

Sale and An agreement to sell

where the seller transfers the ownership rights to the buyer immediately on making the contract, it is the contract of sale, but where the ownership rights are to pass on some future date upon the fulfillment of certain conditions then it is called an agreement to sell.

ESSENTIALS OF A CONTRACT OF SALE

Two parties- buyer and seller Goods Price Transfer of general property

Essential elements of a valid contract

A contract of sale may be absolute or conditional.

DIFFERENCE BETWEEN
Sale Agreement to sell

Ownership passes to the buyer. It is a executed contract. Risk of loss falls on the buyer. Seller cannot resell the goods. It can be in case of existing and specific goods.

Ownership remains with the seller. It is a executory contract. Risk of loss falls on the seller. Seller can sell goods to third party. It can be in case of future and unascertained goods.

Sale

Agreement to sell

In case of breach of a contract, seller can sue for the price of the goods . The seller is only entitled to the ratable dividend of the price due if the buyer becomes insolvent. The buyer is entitled to recover the specific property from the assignee if the seller becomes insolvent.

In case of breach of a contract, seller can sue only for damages not for the price. The seller may refuse to sell the goods to the buyer w/o payments if the buyer becomes insolvent. Buyer can claim only ratable dividend for the money paid.

DISTINCTION BETWEEN
Sale Hire-purchase agreement

Property in the goods is transferred to the buyer immediately at the time of the contract. The position of the buyer is that of owner of the owner of the goods.

The goods passes to the hirer on the payment of the last installment. The position of the buyer is that of a bailee till he pays the last installment.

Sale

Hire purchase agreement

The buyer cannot terminate the contract and is bound to pay the price of the goods.

The hirer may, terminate the contract, by returning the goods to its owner without any liability to pay the remaining installment.

BAILMENT

Bailment is the delivery of the goods for some specific purpose under a contract on the condition that the same goods are to be returned to the bailor or are to be disposed of according to the directions of the bailor. For example:A guard hired to protect the paintings at a museum.

FEATURES OF BAILMENT
Subject is personal property 2. Transfer is temporary possession 3. Transfer is temporary control 4. Both parties intend to return the goods A bailment must be personal property. Real property such as land and buildings, cannot be bailed.
1.

DISTINCTION BETWEEN
Sale

Bailment

The property in goods is transferred from the seller to the buyer.

The return of goods in contract of sale is not possible.

There is only transfer of possession of goods from the bailor to the bailee for any of the reasons like safe custody, carriage etc. The bailee must return goods to the bailor on the accomplishment of the purpose for which bailment was made.

Sale

Bailment

The consideration is the price in terms of money.

The consideration may be gratuitous or non gratuitous.

CONDITIONS AND WARRANTIES [SEC 12]

TERMS

Representation: Statement made by the seller before entering into a contract. Stipulation: If such representation forms an integral part of the contract and other party relies upon it.

No Representation: CAVEAT EMPTOR i.e., Let the Buyer Beware is applied

CONDITION

AND WARRANTY

A stipulation in a contract of sale with reference to goods which are subject matter there of, may be a condition or a warranty.

These stipulations forms a part of the contract of sale and breach of it provides a remedy to the buyer against the seller.

CONDITION [SEC12(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. It goes to the root of the contract.
Its non fulfillment upsets the very basis of the contract.

Example :- [Behn v. Burness,1863] By charter party( a contract by which a ship is hired for the carriage of goods), it was agreed that ship m of 420 tons now in port of Amsterdam should proceed direct to new port to load a cargo. In fact at the time of the contract the ship was not in the port of Amsterdam and when the ship reached Newport, the charterer refused to load. Held, the words now in the port of Amsterdam amounted to a condition, the breach of which entitled the charterer to repudiate the contract.

WARRANTY : SEC.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 right to reject the goods and treat the contract as repudiated.

DISTINCTION BETWEEN
Condition Warranty

It is a stipulation which is essential for the main purpose of the contract. In case of breach of a condition, the aggrieved party can repudiate the contract of sale.

It is a stipulation which is collateral to the main purpose of the contract. In case of breach of warranty, the aggrieved party can claim damages only.

Condition

Warranty

A breach of condition may be treated as breach of warranty.

The breach of warranty cannot be treated as a breach of a condition.

TYPES Express Conditions : Expressely provided in the contract Implied conditions & warranty(sec 14 to 17) : which the law implies in a contract of sale

IMPLIED CONDITIONS :
Conditions as to title [Sec.14(a)] [Rowland v. Divall,(1923)] Sale by description [Sec.15] [Bowes v.shand,(1877)] Condition as to quality or fitness.[Sec.16(1)] Conditions as to Merchantability [Sec.16(2)] [R.S.Thakur v. H.G.E. corp., A.I.R.(1971)] Conditions implied by custom[Sec.16(3)]. Sale by Sample (Sec.17) Condition as to wholesomeness.

IMPLIED WARRANTIES
Warranty of Quiet possession-Sec.14(6) Warranty against encumbrances-Sec.14(c) Warranty to disclose dangerous natures of goods. Warranty as to quality or fitness by usage of trade Sec.16(4).

CAVEAT EMPTOR
Let the Buyer Beware The maxim Caveat Emptor does not apply & the contract will be subject to the implied conditions under the following circumstances : 1. Sale under fitness for buyers purpose 2. Sale under merchantable quality 3. Sale under usage of trade 4. Consent by Fraud

EXCEPTIONS
Fitness for buyers purpose. Sale under a patent or trade name. Merchantable quality Usage of trade Consent by fraud

RIGHTS OF UNPAID SELLER

UNPAID SELLER (SEC.45)

A seller of goods is deemed to be an unpaid seller when:The whole of the price has not been paid or tendered;

A bill of exchange or other negotiable instrument has been received as a conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.

CONDITIONS

The term "seller" includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price. The seller shall be called an unpaid seller even when only a small portion of the price remains to be unpaid. It is for the non payment of the price and not for other expenses that a seller is termed as an unpaid seller. Where the full price has been tendered by the buyer and the seller refused to accept it, the seller cannot be called as unpaid seller.

CONTINUED

..

Where the goods have been sold on credit, the seller cannot be called as an unpaid seller. Unless :
If during the credit period seller becomes insolvent, or

On the expiry of the credit period, if the price remains unpaid, Then, only the seller will become an unpaid seller.

1) Right against goods: Where the property in the goods has passed Lien on goods A right of stoppage-in-transit A right of Re-sale Where the property in the goods has not passed Withholding delivery Stoppage in transit 2) Right against the buyer: Suit for price Suit for damages Repudiation o contract Suit for interest

RIGHT OF LIEN (SEC.47-49) :

the goods are not sold on credit the goods have been sold on credit, but the period of credit has expired the buyer becomes insolvent

RIGHT OF STOPPAGE IN TRANSIT (SEC.50-52)

The transit is end in following cases: If the buyer obtains the possession of the goods before its arrival at the destination If, after the arrival at their destination, the carrier acknowledges to the buyer that he holds on his behalf If the carrier wrongfully refuses to deliver the goods to the buyer

RIGHT OF RE-SALE (SEC.54)

Where the goods are of perishable nature When the buyer does not pay the price