ByVIDHI AGRAWAL

Transactions in the nature of sale of goods form the subject matter of the Sale of Goods Act, 1930. The Act covers topics

such as the concept of sale of goods, warranties and

conditions arising out of sale, delivery of goods and passing of property and other obligations of the buyer and the seller.

It also covers the field of documents of title to goods and the

transfer of ownership on the basis of such documents. The Act came into force on 1 July, 1930. It extends to the whole of India, except Jammu and Kashmir.

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Definition and Essentials of a Contract of Sale There must be at least two parties

Transfer or agreement to transfer the ownership of goods

The subject matter of the contract must necessarily be goods Price is the consideration of the contract of sale A contract of sale may be absolute or conditional [s.4(2)].

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All other essentials of a valid contract as per the Indian Contract Act, 1872 must be present
Sale and Agreement to Sell. Where under a contract of sale, the property (ownership) in the goods is transferred from the seller to the buyer, it is called a sale [s. 4(3)]. Thus, sale takes place when there is a transfer of ownership in goods from the seller to the buyer. A sale is an executed contract.

Ramanathan sells his car to Bhim for Rs 1 lakh. If all essential elements of a valid contract are present, it is a sale and therefore the ownership of the car stands transferred from Ramanathan to Bhim. This is so even where the payment of the price or the delivery of the car or both have been postponed.
Agreement to sell means a contract of sale under which the transfer of property in goods is to take place at a future date or subject to some conditions thereafter to be fulfilled.

Example. Amar agrees to sell certain goods to Akbar. The goods are on their way from London to Mumbai in a ship. The ownership in the goods will pass to the buyer when the goods come and the agreement is subject to the condition that the ship arrives at port with the goods.

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Sale A sale is an executed contract. Since the ownership has passed to the buyer, the seller can sue the buyer for the price of the goods, if the latter makes a default in payment. It creates a right in rem, i.e., against the whole world. In case of loss of goods, the loss will fall on the buyer, even though the goods are in the possession of the seller. It is because the risk is associated with ownership. In case, the buyer pays the price and the seller thereafter becomes insolvent, the buyer can claim the goods from the official receiver or assignee, as the case may be. If the buyer becomes insolvent without paying the price, the ownership having passed to the buyer, the seller shall have to deliver the goods to the official receiver or assignee, as the case may be, except where he has a lien over the goods.

Agreement to sell It is an executory contract. In case of breach, the seller can only sue for damages, unless the price was payable at a stated date. It creates a right in personam, i.e., against specified person only. The loss in this case shall be borne by the seller, even though the goods are in the possession of the buyer. In this case, the buyer cannot claim the goods but only a rateable dividend for the money paid. Under this, the seller can refuse to deliver the goods to the official receiver or assignee, as the case may be.

Sale and hire purchase

Sale of goods and work and labour Sale and contract for labour and materials

Sale and barter

Sale and bailment Sale and lease Sale and gift Sale and mortgage, pledge and hypothecation of goods

Meaning of Goods. Goods means every kind of movable property, other than actionable claims and money; and includes stocks and shares. The term goods excludes money. Money means legal tender and not the rare coins which can be sold and purchased as goods. Documents of Title to Goods. Section 2(4) recognises the following as documents of title of goods: bill of lading, dock warrant, ware-housekeepers certificate, wharf certificate, railway receipt, warrant or order for the delivery of goods and any other document used in the ordinary course of business as a document of title. Classification of Goods. Goods may be classified as existing, future and contingent. Existing goods are those which are owned or possessed by the seller at the time of the contract .

Conditions and Warranties (Ss.11-17). In a contract of sale, parties make certain stipulations, i.e., agree to certain terms. All stipulations cannot be treated on the same footing. Some may be intended by the parties to be of a fundamental nature, e.g., quality of the goods to be supplied, the breach of which, therefore, will be regarded as a breach of the contract. Some may be intended by the parties to be binding, but of a subsidiary or inferior character, e.g., time of payment, so that a breach of these terms will not put an end to the contract but will make the party committing the breach liable to damages. The former stipulations are called conditions and the latter warranties. Example. Kaushal asks a dealer to supply him a shirt which would not shrink after use and wash. The dealer supplies a shirt which shrinks after use and wash. Kaushal can reject the shirt or keep the shirt and claim damages. Here the stipulation to supply a shirt which would not shrink after use and wash is a condition.

A condition is a stipulation which is essential to the main purpose of the contract. A warranty is a stipulation which is collateral to the main purpose of the contract.
If there is a breach of a condition, the aggrieved party can repudiate the contract of sale, in case of a breach of a warranty, aggrieved party can claim damages only. A breach of a condition may be treated as a breach of a warranty. This would happen where the aggrieved party is contented with damages only. A breach of a warranty ,however, cannot be treated as a breach of a condition.

Express conditions and warranties are those which are expressly provided in the contract. Implied conditions and warranties are those which the law implies into the contract unless the parties stipulate to the contrary. Implied conditions
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Condition as to title Sale by description

Condition as to quality or fitness

Condition as to merchantability Condition implied by custom Sale by sample Condition as to wholesomeness

Implied warranties
1.Warranty of quiet possession 2.Warranty of freedom from encumbrances 3.Warranty as to quality or fitness by usage of trade 4.Warranty to disclose dangerous nature of goods

This means let the buyer beware, i.e., in a contract of sale of goods the seller is under no duty to reveal unflattering truths about the goods sold .Therefore, when a person buys some goods, he must examine them thoroughly. If the goods turn out to be defective or do not suit his purpose or if he depends upon his own skill or judgment and makes a bad selection, He cannot blame anybody excepting himself.
Exceptions 1.Fitness for buyers purpose. 2.Sale under a patent or trade name

3.Merchantable quality
4.Usage of trade 5.Consent by fraud

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Meaning of Property in Goods. The phrase property in goods means ownership of goods. The ownership of goods is different from possession of goods. The possession of goods refers to the custody of goods, though normally a person who is in possession of the goods shall also be its owner but it need not necessarily be so. One of the most important questions, in a contract of sale of goods is: when does the property in the goods pass from the seller to the buyer? Rules Regarding Passing of Property in Goods from the Seller to the Buyer. Sections 18 to 25 lay down the rules which determine when property passes from the seller to the buyer. Specific or ascertained goods(section 20 to 22) Specific goods in a deliverable state Specific goods not in a deliverable state Unascertained or future goods(section23) Unconditional appropriation Mode of appropriation Seller reserving the right of disposal

Section 26 (First paragraph) reads: unless otherwise agreed, the goods remain at the sellers risk until the property therein is transferred to the buyer,
Example. A buys goods of B and property has passed to him; but the goods remain in Bs

warehouse and the price is unpaid. Before delivery a fire burns down the warehouse destroying the goods. A must pay the price of the goods as A was the owner.

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Transfer of Title by Non-owners. Section 27 lays down a general rule as to transfer of title, that is, it is only the owner of goods who can transfer a good title. No one can give a better title than what he himself has. This rule is expressed by the maxim, nemo dat quod non habet which means that no one can give what he himself has not. Exceptions to the general rule Sale by a mercantile agent Sale by a joint owner Sale by a person in possession under a voidable contract Sale by a seller in possession of goods after sale Sale by a buyer in possession of goods Sale by an unpaid seller Exceptional cases under other Acts

The contract of sale of goods is to be performed. In this context, Ss.31-44 provide for the duties of the seller and the buyer and the rules regarding delivery of goods. Duties of the Seller and the Buyer. It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale (s.31). The seller has the duty of giving delivery of goods according to the (i) terms of the contract, and (ii) rules contained in the Act. Delivery. Delivery is defined as a voluntary transfer of possession from one person to another [s.2(2)]. Section 33 provides that delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf. Therefore, any other act, in addition to transfer of physical possession, which the parties agree to treat as equivalent thereto, has the effect of delivery.

The following are the rules regarding delivery of goods: 1. Delivery of part of goods sold may amount to delivery of the whole if it is so intended and agreed. 2. Unless agreed otherwise, the seller is not bound to deliver goods, till the buyer applies for delivery (s.35). 3. Place of delivery. 4. Time of delivery. 5. Demand for and tender of delivery must be at a reasonable hour. 6. Delivery of wrong quantity. 7. Instalment delivery. 8. Delivery to the carrier or wharfinger (s.39). 9. Where goods are delivered to a buyer, which he has not personally examined. 10. Buyer not bound to return the rejected goods.

A contract is comprised of reciprocal promises. In a contract of sale, if seller is under an obligation to deliver goods, buyer has to pay for it. In case buyer fails or refuses to pay, the seller, as unpaid seller, shall have certain rights.
Who is an Unpaid Seller? A seller of goods is an unpaid seller when (i) the whole of the price has not been paid or tendered. (ii) a bill of exchange or other negotiable instrument has been received as conditional payment. Rights of an Unpaid Seller. The rights of an unpaid seller may broadly be classified under two heads, namely: (i) Rights under the Ss.73-74 of the Indian Contract Act, 1872, i.e., to recover damages for breach of contract. (ii) Rights under the Sale of Goods Act, 1930: (a) rights against the goods; (b) rights against the buyer personally. The rights against the goods are as follows

Lien on Goods (Ss. 47-49)

Right of Stoppage in Transit Lien and Stoppage-in-Transit Distinguished

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Lien Available only when the goods are in the possession of the unpaid seller Available, even when the buyer is not an insolvent.

Stoppage-in-Transit Available only after the seller has parted with the possession of the goods. Available only when the buyer becomes an insolvent.

Right of Resale (s.54)

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When the goods are put up for sale in lots, each lot is deemed prima facie, to be the subject matter of a separate contract of sale. At an auction, the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; until such completion any bidder may withdraw his bid. It is also the practice to say three times. A right to bid may be reserved expressly by or on behalf of the seller and where such right is expressly reserved but not otherwise, the seller or any person on his behalf may bid at the auction. Where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid for himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person. The sale may be notified to be subject to a reserved or upset price. If the seller makes use of pretended bidding to raise the price, sale is voidable at the option of the buyer.