Sale of goods act

The sale of goods is the most common of all commercial contracts

A knowledge of its main principles is of utmost importance to all classes of the community. The law relating to it is contained in the SALE OF GOODS ACT,1930. Prior to this Act, the law of sale of goods was contained in Chapter VII i.e.sec 76 to123 of Indian Contract Act, 1872.

Comparison between Contract and Sale of Goods Act

Contracts for sale of goods are subject to general legal principles applicable to all contracts The general provisions of the Indian Contract Act continue to apply to contracts for sale of goods in so far as they are not inconsistent with the express provisions of Sale Of Goods Act. A contract of sale, however, has some special features which are no common to all contracts

Meaning
According to Sec.4 (1) of the sale of goods act,1930, contract of sale of goods is a contract whereby the seller transfers the property in goods to the buyer for a price. Contract of sale is a generic term which includes both sale as well as an agreement to sell. SALE AND AGREEMENT TO SALE: Where under a contract of sale, the property in the goods is transferred from seller to buyer, the contract is called a sale, but where the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell. An agreement to sell becomes sale when time elapses or the conditions, subject to which the property in goods is to be transferred are fulfilled

Distinction between Sale And agreement to sell

Basis of Distinction
Transfer of ownership

Sale
Transfer of ownership of goods takes place immediately It is an executed contract because nothing remains to be done Buyer gets a right to enjoy the goods against the whole world including the seller. Therefore, a sale created right against the property Transfer of risk of loss of goods takes place immediately because ownership is transferred. As a result, in case of destruction of good s the loss shall be borne by the buyer even though the goods are in the

Agreement to sell
Transfer of ownership of goods is to take place at a future time or subject to fulfillment of some condition It is an executory contract because something remains to be done. Buyer does not get such right to enjoy the goods. It only creates right against the person Transfer of risk of loss of goods does not take place because ownership is not transferred. As a result, in case of destruction of goods, the loss shall be borne by the seller even though the goods are in the possession

Executed or executory contract Conveyance of property

Transfer of risk

Essential elements of contract of sale Seller and Buyer

Goods

Price

Transfer of property

Essential elements of valid contract

GOODS
Goods means every kind of movable property other than actionable claims and money and, includes the following : a)Stock and shares b)Growing crops, grass and things attached to or forming part of land which are agreed to be served before sale or under contract of sale

GOODS
Types of goods
goods

Existing goods

Future goods

Contingent goods

Specific goods

Ascertained goods

Unascertained goods

THE PRICE
The price in a contract of sale means the money consideration for sale of goods. It forms an essential part of the contract. It must be expressed in money. It is a consideration for the transfer or agreement to transfer the property in goods from seller to the buyer. It is not essential that the price should be fixed at the time of sale. It must, however, be payable, though it may not have been fixed.

Stipulation as to the Time

Stipulations relating to time in a contract of sale may be 1. Stipulations relating to time of payment these are not of essence of a contract of sale, unless a different intention appears from the contract 2. Stipulations relating to time of payment, eg., delivery of goods etc As regards these stipulations, time may be of the essence of the contract but this

CONDITIONS AND WARRANTIES

WHAT IS A CONDITION ?
A Condition is a stipulation i. Which is essential to the main purpose of contract, and ii. The breach of which gives the aggrieved party a right to terminate the contract

WHAT IS A WARRANTY?
A warranty is a stipulation i. Which is collateral to the main purpose of contract, and ii. The breach of which gives the aggrieved party a right to claim damages but not a right to reject the goods and to terminate the contract the contract

Distinction between Condition and Warranty

Basis of distinction Essential vs. Collateral Condition It is a stipulation to the main purpose of contract The aggrieved party can terminate the contract A breach of condition can be treated as a breach of warranty Warranty It is a stipulation which is only collateral to the main purpose of the contract The aggrieved party can claim damages but cannot terminate contract A breach of warranty cannot be treated as a breach of condition.

Right in case of breach

Treatment

Breach of condition would be held as breach of warrantycases, breach of conditions will be held as breach of In following
warranty only:

1. Voluntary waiver of condition: When a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may a) waive the condition, or b)elects to treat the breach of the condition as a breach of warranty If the buyer once decides to waive the condition, he cannot afterwards insist on fulfillment.
2. Acceptance of goods by buyer : where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, unless there is a term of the contract, express or implied, to the contrary

Express conditions and warranties

These are expressly provided in the contract For eg: a buyer desires to buy a SONY TV MODEL NO.XXX. here model no. is an express condition For eg: In an advertisement for Khaitan Fans, guarantee for 5 years is an express warranty

Implied Conditions And Warranties

Implied conditions Implied warranties

Condition as to the title

Condition in case of sale by description Condition in case of sample

Warranty as to quiet possession

Warranty of freedom of encumbrances Warranty as to quality or fitness for a particular purpose annexed by usage of trade Warranty to disclose dangerous nature of Goods

Condition in case of sale by description as well as sample Condition as quality or fitness Condition as to merchantable quality Condition as to wholesomeness Conditions implied by custom

Doctrine of Caveat Emptor

Let the buyer be aware

Subject to the provision of this act and any other law for time being in force, there is no implied warranty or condition as to quality or fitness for any particular purpose of goods supplied under contract of sale

Exceptions to the rule:1.Fitness for buyers purpose. 2.Sale under a patent or trade name 3.Merchantable quality 4.Usage of trade 5.Consent by fraud

Property Possession and The Risk

The property in goods passes from the seller to the buyer for the following reasons:

Risk follows the ownership:

whether delivery has been made or not and whether, price has been paid or not and whether, price has been paid or not. This is subject to agreement between the parties. When the goods are damaged or destroyed by the action of the third parties, it is owner of goods who can take action against them.

In the event of insolvency of either seller or the buyer, the question whether Official receiver or assignee can take over the goods or not depend on whether the property in the goods has passed from seller to the buyer. Seller can sue for price, unless otherwise agreed, only if the

TRANSFER OF PROPERTY
The primary rules for ascertaining when the property in goods passes to the buyer are as follows:1. where there is a contract for sale of unascertained goods, no property, in the goods is transferred to the buyer unless and until the goods are ascertained (Sec.18) 2. Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. For the purpose of ascertaining the intention of parties, regards shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case(Sec.19).

Where the intention of the parties cannot be ascertained, the following rules shall apply :
1. Specific goods: In case of specific goods:in a deliverable state, if the contract is unconditional, property passes as soon as the contract is entered into. if the seller has to do something to put them in a deliverable state, property passes only when such thing is done and notice thereof is given to the buyer. in a deliverable state if the seller has to do something for the purpose of ascertaining the price, property will pass only when such act is done and

2. Unascertained Goods:
In case of unascertained or future goods sold by description, property passes only when goods according to the description are unconditionally appropriated to the contract and the buyer is given notice thereof. delivery to carrier(the seller not reserving right of disposal) amounts to an unconditional appropriation.

3. Goods sent on approval: In case of goods delivered to a buyer on approval or sale or return property passes when he signifies his approval or acceptance or when he does some act adopting the transaction. if he retains the goods without giving notice, of rejection, property passes when the time agreed for returning the goods expires or after reasonable time has expired.

DELIVERY OF GOODS
Delivery of goods may be :1. Actual delivery where the goods are handed over by the seller to the buyer or his duly authorized agent, the delivery is said to be actual. 2. Symbolic Delivery where the goods are ponderous or bulky and incapable of actual delivery, the delivery may be symbolic. For eg handing over the keys of a warehouse or handing over the documents relating to the goods like bill of lading, railway receipt, etc.

RIGHTS OF THE BUYER

1. Right to have delivery as per the contract 2. Right to reject the goods 3. Right to repudiate 4. Right to notice of insurance 5. Right to examine 6. Right against seller for breach of contract i) suit for damages ii) suit for price iii) suit for specific performance iv) suit for breach of warranty v) Repudiation of contract before due date vi) suit for interest

DUTIES OF THE BUYER

1. Duty to accept the goods and pay for them in exchange for possession 2. Duty to apply for delivery 3. Duty to demand delivery at a reasonable hour 4. Duty to accept instalment delivery and pay for it 5. Duty to take risk in course of transit 6. Duty to intimate seller where he rejects the goods 7. Duty to take delivery 8. Duty to pay price 9. Duty to pay damages for non acceptance

UNPAID SELLER
An unpaid seller is one 1.who has not been paid or tendered the whole of the price or 2.One who receives a bill of exchange or other negotiable instruments as conditional payment and the condition on which it was received has not been fulfilled by reason of dishonor of the instrument or otherwise.

Right of an unpaid seller against the goods

When the property in goods has passed

When the property in goods has not passed

Lien

Withholding delivery

Stoppage in transit

Other rights

resale

Rights of Unpaid seller against the buyer personally

Suit for price

Suit for damages

Suit for interest

AUCTION SALE

A sale by auction is a public sale where different intending buyers try to outbid each other.

The goods are ultimately sold to the highest bidder The auctioneer who sells the goods by auction is an agent of the seller, i.e. the owner

RULES OF AUCTION SALES

1.Goods put up for sale lots 2.Completion of sale 3.Right of seller to bid 4.Sale not notifies subject to a right to bid 5.Reserve price 6.Use of pretended bidding 7.Knock out or agreement not to bid against each other