The Sale of Goods Act,1930

Business Law

The Sale of goods act, 1930

Prof. Anjali Aurangabadkar

The sale of goods act Contract for Sale of Goods - Meaning -

Essentials of a Contract of Sale - Formalities of a Contract of sale. Provisions relating to conditions and

Warranties, Provisions relating to transfer of property or ownership

Provisions relating to performance of Contract of Sale –

Rights of Unpaid Seller – Rules as to delivery of goods.

Contract for Sale of Goods

“Sale” – A contract of sale of goods is a contract whereby the sellers transfers or agrees to transfer the property in goods to the buyer for price

Essentials of contract of sale

1. There must be at least two parties2. Transfer or agreement to transfer the

ownership of the goods3. The subject matter of the contract must

necessarily be goods4. The consideration is price5. A contract of sale may be absolute or

conditional6. All other essentials of a valid contract must

be present

Goods

“Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale

Documents of title to Goods A document of title to goods may be described as any document used as proof of the possession or control of goods, authorizing or purporting to authorize, either by endorsements or by delivery, the possessor of the document to transfer or receive goods thereby represented

Following documents are regarded as the title to the goods

Bill of lading Dock warrant Ware housekeeper's certificate Wharfinger’s certificate Warrant or order for the delivery of the goods And any other document used in the ordinary

course of business as a document of title

Classification of goodsClassification of goods

Goods may be classified as

1. Existing goods- existing goods are those which are owned or possessed by the seller at the time of the contract.

existing goods may be either;

1. Specific and Ascertained or,

2. Generic and Ascertained

Existing goods-

“Specific goods” means goods identified and agreed upon at the time a contract of sale is made

“Ascertained Goods” – identified in accordance with the agreement after the time a contract of sale is made

Generic or Unascertained Goods – are the goods indicated by description and not specifically identified

Classification of goodsClassification of goods

Future goods – “future goods” means goods to be manufactured or produced or acquired by the seller after making the contract of sale

Contingent goods – contingent goods are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen

Delivery – its forms and derivatives Delivery must be of three kinds Actual Delivery Constructive Delivery Symbolic Delivery

Sale v/s Agreement to sell

Sale1. It is an executed contract for

which the consideration has been paid.

2. It effects a transfer of general property in goods, and creates a right in rem

3. If the goods are destroyed, the loss falls on the buyer even though the goods are in the possession of the seller.

4. If the buyer commits a breach, the seller can sue for the price of the goods

Agreement to sell1. It is an executory contract i.e.

for which consideration has to be paid at a future date.

2. It does not affect a transfer of general property in the goods, and merely creates a right in personum.

3. If the goods are destroyed, the loss falls on the seller even though the goods are in the possession of the buyer

4. If the buyer commits the breach the seller can sue for damages

5. If the seller commits a breach: a) the buyer has a personal remedy against the seller for damages. b) the buyer has all the remedies which an owner of goods has, e.g. a suit for conversion or detinue. c) in some cases the buyer can follow goods in the hands of the third persons also.

6. If the seller wrongfully re- sells, he becomes guilty of conversation, and the buyer can recover the goods, even from a third person.

5. If the seller commits a breach, the buyer has only a personal remedy against the seller for damages from the seller.

6. The seller may resale goods to third persons, but in that case, the buyer can claim damages from the seller.

7. If the buyer becomes insolvent before he pays for the goods, the seller in the absence of a lein over the goods, must return them to the official receiver of Assignee. He can only claim a ratable dividend for the price of the goods.

8. If the seller becomes insolvent, the buyer is entitled to recover the goods from the Official Assignee or Receiver

7. If the buyer becomes insolvent and has not yet paid the price, the seller is not bound to part with the goods until he is paid for.

8. If the buyer, who has paid the price, finds that the seller has become insolvent, he can only claim a ratable dividend.

Formalities of contracts of sale

A) Modes of formation: A contract of sale may be made in any of the following modes:

There may be immediate delivery of the goods; or There may be immediate payment of price, but it may

be agreed that the delivery is to be made at some future date; or

There may be immediate delivery of the goods and an immediate payment of price; or

It may be agreed that the delivery or payment or both are to be made in installments ; or

It may be agreed that the delivery or payment or both are to be made at some future date

B) Subject matter of the contract of sale : the subject matter is always the goods.

The subject matter of the contract must always be goods. The goods may be existing or future goods.

Like an ordinary contract, a contract of sale of goods can also be made with regard to the goods, the acquision of which by seller depends upon a contingency, which may or may not happen. Thus, a contract for sale of certain cloth to be manufactured by a certain mill is a valid contract. Such contracts are called contingent contracts.

When the seller purports by his contract of sale to effect a sale of future goods, the contract will operate only as an agreement to sell the goods and not as sale.

C) Destruction of subject matter of a contract Goods are not existing at the time of the contract: if at

the time a contract of sale is entered into, the subject matter of a contract being specific goods, which without the knowledge of the seller have been destroyed or so damaged as not to answer to the description in the contract, and then the contract is void.

Goods perishing after the contract is made : where there is an agreement to sell specific goods and the goods, subsequently without any fault of the seller or the buyer perish or suffer such damages as not to answer to the description in the agreement before the risk passes to the buyer, the agreement is avoided

D) Ascertainment of the price : ‘Price’ means the monetary consideration of the sale of

the goods The price may be: A) Fixed by the contract B) agreed to be fixed in a manner provided by the

contract e.g. by a valuer C) Determined by the course of dealings between the

parties

E) Stipulation as to time As regard time for the payment of price,

unless a different intension appears from the terms of the contract, stipulation as regard this, is not deemed to be the essence of the contract of sale. But delivery of goods must be made without delay. Whether or not such a stipulation is of the essence of a contract depends upon the terms agreed upon

Conditions and Warranties

Conditions1. A condition is essential to the main purpose of the contract.

2. The aggrieved party can repudiate the contract or claim damages or both in the case of breach of condition

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

Warranty

1. It is only collateral to the main purpose of the contract

2. The aggrieved party can claim only damages in case of breach of warranty

3. A breach of warranty cannot be treated as a breach of condition.

Conditions and warranties

When breach of condition can be treated as breach of warranty

1. Where the buyer altogether waives the performance of the condition

2. Where the buyer elects to treat the breach of the condition as one of the warranty i.e. he may only claim damages instead of repudiating the contract

3. Where the contract is non severable and the buyer has accepted either the whole goods or any part thereof

4. Where the fulfillment of any condition or warranty is excused by law of reason of impossibility or otherwise. The provision is specially made for covering cases of non- fulfillment due to war, governmental restrictions etc.


Express and Implied conditions and warranties

Conditions and warranties may be either express or implied.

Express conditions are those, which are agreed upon between the parties at the time of the contract and are expressly provided in the contract.

An implied condition may be negated or waived by an express agreement


Following are the implied conditions in a contract unless the circumstances of the contract show a different intention

1. Conditions as to title

2. Sale by description

3. Sale by sample

4. Sale by sample as well as description

5. Condition as to quality or fitness

Caveat Emptor

In case of Sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display their goods in the open market, it is for buyer to make proper selection or choice of the goods. It is the duty of the buyer to satisfy himself before buying the goods that the goods will serve the purpose for which they are being bought. If the goods turn out to be defective he cannot hold the seller liable.

Provisions relating to transfer of property or ownership Nemo Dat Quod Non Habeat – no one can give what he has

not the owned Exceptions Sale with the consent of the authority of the owner Title by estoppel Sale by a merchantile agent Sale by one of the joint owner Sale by a person in posession under a voidable contract Sale by seller in possession after sale Sale by buyer in possession before the propertyhas vested in

him Sale by an unpaid seller Sale under the provisions of other Acts

Performance of the contract

A)Rule regarding Delivery of the goods

1. Effect of part delivery

2. Buyer to apply for delivery

3. Place of delivery

4. Time of delivery

5. Goods in possession of a third party

6. Time for tender of delivery

7. Expenses of delivery

8. Delivery of wrong quantity

9. Installment deliveries

10.Delivery to carrier

11.Deterioration during transit

12.Buyer’s right to examine the goods

Performance of the contract

B) Acceptance of Delivery of goods Acceptance is deemed to take place when the

buyer does the following Intimates the seller that he had accepted the

goods; or Does any act to the goods, which is inconsistent

with the ownership of the seller; or Retains the goods after the lapse of a reasonable

time, without intimating to the seller that he has rejected them

Unpaid Seller The seller of the goods is deemed to be an “Unpaid

Seller” in the following circumstances The whole of the price has not been paid or

tendered and the seller had an immediate right of action for the price

Bill of exchange or other negotiable instrument was given as payment but the same has been dishonoured, unless this payment was an absolute, and not a conditional payment.

Any person who is in a position of a seller, is also a seller, and may exercise the rights conferred upon an ‘unpaid seller’ in above said circumstances

Rights of an Unpaid Seller

RIGHTS OF AN UNPAID SELLER

(B) Right against the Buyer

(i) Right of lein

(i) Suit for price

(A) Right against the goods

(ii) Right of StoppageIn transit

(iii) Right ofresale

(ii) Suit for Damages

(iii) Repudiation Of contract

(iv) Suit for interest