SALE OF GOODS ACT 1930

Prepared by Snehal Jambhale MFM 1st Year

INDEX
1. Sale & Agreement to Sale. 2. Essential Requisites of Sale. 3. Formalities of a contract of sale. 4. Transfer of Property as Between Seller and Buyer a) Transfer of property b) Property cannot pass until the goods are identified c) Part of a specific whole d) Property and Risk e) Identification of the goods. 5. Rights of Unpaid Seller against goods .

SECTION 4 SALE AND AGREEMENT TO SALE

1. The 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. There may be a contract of sale between one part owner and another. A contract of sale may be absolute or conditional. Where under a contract of sale the property in the goods is transferred from the seller to the 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 sale. An agreement to sell becomes a sale when the time elapses; all the conditions are fulfilled subject to which the property in the goods is to be transferred.

2. 3.

4.

SECTION 4 SALE AND AGREEMENT TO SALE

Examples: The Section may be illustrated by the following examples: A agrees to buy a haystack from B on Bs land with liberty to come on Bs land to take it away. This is a sale and B cannot revoke the licence given to A to woo on his land. Agreement by A to buy 20 tonnes of oil from the seller. The seller has many tanks, with more than 20 tonnes in them. This is merely an agreement to sale. Agreement for sale of a quantity of nitrate of soda to arrive at a certain ship. This is an agreement to sell at a future date subject to the double condition of the arrival of the ship with the specified cargo on board. A customer who picks up goods in a self-service shop is merely offering to buy them and the sale is not complete until they are paid for.

ESSENTIAL REQUISITES OF SALE

In the case of (state of Madras Vs Gannon Dunkerley and Company Limited, 1958) the Supreme Court has held that according to the law, both of England and India, in order to constitute a sale, it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which of course presupposed capacity to contract, that it must be supported by money consideration, that as a result of transaction, the property must actually pass in the goods. Unless all these elements are present there would be no sale.

The essential object of the contract of sale is the exchange of property for a money price. There must be a transfer of property or an agreement to transfer it, from one party, the seller, to the other, the buyer, in consideration of a money payment or of a promise thereof by the buyer thereof. Both under the common law and the statute law relating to sale of goods England and in India, to constitute a transaction of sale, there should be an agreement, expressed or implied relating to goods to be completed by passing of title in those goods. It is the essence of the concept that both the agreement and the sale should relate to the same subject matter. Transfer of property in goods for a price is the linch pine of the definition. It is, however, not an inevitable rule that the price must be fixed. An allotment of goods among partners on dissolution of partnerships is not a sale. Exchange of property for something other than money is not a sale. The difference between a sale and an exchange is that in the former the price is paid in money while in the latter it is paid in good by way of barter. But if the exchange is made partly for goods and partly for a price, the contract is probably one of a sale.

FORMALITIES OF A CONTRACT OF SALE

Section 5: Contract of Sale - how made A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such price. A contract may provide for the immediate delivery of goods or immediate payment of the price or both, or for the delivery or payment by instalments. Or that the delivery of payments or both shall be postponed. Subject to the provisions of any law for the time being enforced, a contract of sale may be in writing or by the word of mouth or may be impliedly or may be implied from the conduct of the parties.

FORMALITIES OF A CONTRACT OF SALE

A statement or conduct inviting the making of an offer such as by display of goods in a shop does not buy itself bind the shopkeeper to accept the customers offer even at the price displayed or advertised. Such invitation to treat therefore differs from an offer, which is intended to be binding on the person making it and is capable of being accepted without any further negotiation. Where, however, the accessibility to goods in intended to an offer capable of acceptance by customers act such as filling the petrol tank of a car from a self service pump or choosing items in a self service shop or taking goods intended for sale for an automatic vending machine the question of obtaining sellers assent does not arise.

FORMALITIES OF A CONTRACT OF SALE

Sub-section 1 emphasis the consensual nature of a contract of sale; the parties may agree to such terms as they think fit. A sale can be complete even without effecting immediate delivery and immediate payment. In a contract of sale, the title in goods passes immediately on the payment of price while in an agreement to sale the title in goods passes at a future time subject to conditions to be fulfilled thereafter however, when the goods are accepted by the buyer and the price is received by the seller the sale is deemed to be complete.

TRANSFER OF PROPERTY AS BETWEEN SELLER AND BUYER SECTION 18 GOODS MUST BE ASCERTAINED

1. 2. 3. 4. 5.

Goods must be ascertained: where there is contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained Synopsis Transfer of property Property cannot pass until the goods are identified Part of a specific whole Property and risk Identification of goods

1.

TRANSFER OF PROPERTY

This and the five following sections of the Act deal with the question foreshadowed by section 4 of the Act and lay down rules which assist in deciding the question when the object of the contract of sale, namely, the transfer of the property in the goods to the buyer has been affected.

2. PROPERTY CANNOT PASS UNTIL THE GOODS ARE IDENTIFIED

It is a condition precedent to the passing of the property in every case that, the individuality of the thing to be delivered should be established. In any given case, there may be question whether this condition is fulfilled or not, and it may be that the property will not pass even if it is fulfilled, but until it is, there is no possibility of the property passing. It is essential that the article should be specific and ascertained in a manner binding on both the parties, for unless that be so, the contract cannot be construed as contract to pas the property in that category. Where according to the terms of the contract, the seller was to supply waste coal ash as and when it was discharged from the bunkers of the powerhouse, it was held that the contract was for the sale of unascertained goods and, therefore no property passed to the buyer till the goods were ascertained.

3.

PART OF A SPECIFIC WHOLE

It is obvious that if the contract is merely for the sale of goods by description, such as a contract for sale of a certain quantity of malting barley, or future goods, the necessary condition is not fulfilled. Nor is it fulfilled even if the goods are so far ascertained that the parties have agreed that they shall be taken from some specified larger stock. The parties did not intend to transfer the property in one portion of the stock more than in another, and the law which only gives effect to their intention does not transfer the property in any individual portion. And the mere fact that an order for the delivery is given by the seller to the buyer, and is lodged by the buyer with a warehouseman, who holds the specified larger stock out of which the goods sold are to be taken, is not sufficient to transfer the property to the buyer. Thus, where the ascertainment of the goods depends upon their being separated from the bulk by the seller or a third party or the buyer, by their being severed, weighed or measured or some other process, no property can pass until this is done.

4. PROPERTY AND RISK

In this class of case, it is necessary to distinguish the passing of the property from the transfer of the risk; the risk usually passes with the property, but may pass independently of it; Thus, acceptance of the delivery warrant for a certain quantity of spirit out of a larger bulk which was liable to deteriorate in storage was held to put the risk of deterioration on the buyer, although he had acquired, not property but only undivided interest in the whole bulk. Equally, it would seem that there can be none in an individual part of a chattel, such as a tree which has been felled, of which a marked portion was sold, and of which the other portion is to be retained by the seller. In such a case, it is conceived, the whole tree remains the property of the seller until the marked portion is severed, even if the severance is to be done by the buyer.

5. IDENTIFICATION OF THE GOODS

The contract itself may provide that the property shall pass on the happening of some specified event, sufficient to identify the goods, and occasionally they may become identified by other means. Thus, in a case where the seller sold 250 quarters of wheat out of a larger bulk belonging to him in a warehouse, and the buyer took delivery of 400 quarters and pledged the remaining 850 quarters to a bank, and in the meantime the seller sold the remainder of the bulk in the warehouse, of which delivery was taken, so that 850 quarters only were left in the warehouse, it was held that by this process of exhaustion the 850 quarters became ascertained goods and property therein passed to the buyer, so that the pledge acquired a title thereto against the seller. In State of Karnataka Vs. The West Coast Paper Mills Ltd. AIR 1986 it was held that under a contract a company was permitted to remove bamboos from the forest area at Rs.10 /- per ton, and the government by a subsequent order enhanced the price to Rs.20/- per ton, it was held that the enhanced rate was no applicable to the bamboos cut although not removed prior to the date of the government order, because on the bamboos being cut and extricated, the goods being ascertained and in a deliverable state, the property had passed to the company.

RIGHTS OF UNPAID SELLER AGAINST GOODS

Section 45. Unpaid seller defined 1. 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 or otherwise. 2. In this chapter, 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 indorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price Examples The section may be illustrated by the following example; The seller draws bills for the price of the goods on the buyer, who accepts them, and the seller negotiates them. Before the bills arrive at maturity the buyer fails. The seller is in position of an unpaid seller

SECTION 46. UNPAID SELLERS RIGHTS

1. Subject to the provisions of this Act and of and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law (a) a lien on the goods for the price while he is in possession of them; (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them ; (c) a right of resale as limited by this Act. 2. Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

SECTION 46. UNPAID SELLERS RIGHTS

Example The section may be illustrated by the following example : Sale of goods to be delivered by instalments, each instalment to be paid for in cash fourteen days after delivery. During the currency of the contract, the buyer becomes insolvent and the price of one instalment is unpaid. The seller need not make further deliveries unless the price of that instalment is paid and cash is paid against delivery of subsequent instalments.