Unit 1 Sale of Goods Act 1930

7/30/2019 Unit 1 Sale of Goods Act 1930

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CONTRACT OF SALE OF GOODS

SALE OF GOODS ACT, 1930

UNIT I


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Sale of Goods Act, 1930

Indian Contract Act, 1872; Chapter VII

Sections 76-123.

Came into force on 1st July 1930.

Act applies to whole of India except the State

of Jammu and Kashmir.

This Act lays down special provisionsgoverning the contract on sale of goods.


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Contract of Sale of Goods

Section 4 (1) of the Sale of Goods Act, 1930

defines A Contract of sale of goods is contract

whereby the seller transfers or agrees to

transfer the property in goods to the buyer for

a price


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Essential Characteristics

There must be 2 parties (buyer and seller)

Object of the contract must be transfer ofproperty in the goods by one person to another

Subject matter of the contract must be Goods Consideration for a sale of goods must be money

consideration called the Price

May be in writing or by word of mouth or partly

in writing and partly by word of mouth orimplied from the conduct of the parties

A contract of sale includes both an actual sale

and agreement to sell


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Distinction between Sale and

Agreement to Sell

Transfer of Property : (S)Property in goods passes from seller to buyer

immediately

(ATS)Transfer of Property to goods take place at a futuredate or subject to certain conditions being fulfilled

Risk of Loss (S) Loss falls on buyer even if seller possesses the goods

(ATS) Loss falls on seller even if buyer possesses the goods

Nature of Contract

(S) Executed Contract (ATS) Executory Contract

Consequences of Breach of contract by buyer (S) Seller can sue for price

(ATS) Seller can sue only for damages


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Distinction between Sale and

Agreement to Sell

Right to Resell (S) Cannot resell

Insolvency of Buyer (S) before he pays, seller must return them to Official Receiver

or Assignee, he will be entitled to a rate-able dividend only for

the price of goods (ATS) Seller is not bound to part with goods until he is paid for

Insolvency of Seller (S) Buyer can recover identical goods from the Official Receiver

or Assignee

(ATS) Buyer can claim a rate-able dividend from the sellersestate

Nature of rights (S) Buyer acquires ajus in rem ie. Right against the whole world

(ATS) Buyer acquiresjus in personam ie. Right against a

particular individual


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Goods

Existing Goods Future Goods Contingent Goods

Specific Goods Ascertained GoodsUnascertained

Goods


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Goods

Goods mean every kind of movable propertyand includes

Stocks and shares

Growing crops, grass Things attached to or forming part of the land

which can be severed from the land

Does not include money (currency not old orrare coins) and actionable claims (claim whichcan be enforced through the court of law).


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Existing Goods

Existing Goods are those which are owned or

possessed by the seller at the time of contract

Specific and Ascertained goods identified

and agreed upon at the time a contract of sale

is made

Generic and Unascertained goods indicated

by description and not specifically identified


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Future Goods

Goods to be manufactured or produced or

acquired by the seller after making the

contract of sale.

Contingent Goods

Goods the acquisition of which by the sellerdepends upon a contingency which may or

may not happen.


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Price

Money consideration for a sale of goods

May be money actually paid or promised to bepaid depending on the agreement (may be

cash or credit)

Modes of fixing price Price expressly stated in contract

Price to be fixed in manner provided by contract

Price to be determined by the course of dealingsbetween the parties

Reasonable price

Price fixed by third party (eg. valuer)


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Document of Title of Goods

Any Document which is used in the ordinary

course of business as proof of the possession

or control of goods, or authorizing or

purporting to authorize, either by

endorsement or by delivery the possessor of

the document to transfer or receive goods

thereby represented is document of title ofgoods.

It is proof of the ownership of the goods


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Examples of Document of title to

goods

Bill of lading (receipt given by ship owner

acknowledging the receipt of goods for

carriage)

Dock Warrant (issued by dock owner [port

ware housekeeper]; contains details of goods

held on behalf of a person)

Warehouse keepers certificate (issued by

ware housekeeper stating that the goods

specified in the document are in the

warehouse)


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Examples of Document of title to

goods

Railway receipt (document issued by the

railway as the acknowledgment of the receipt

of goods; surrender of receipt entitles the

delivery of goods)

Delivery Order (order given by the owner of

goods directing a person who holds the goods

on his behalf to deliver them to a personnamed therein)


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Conditions and Warranties

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. Sec 12 (2)

Warranty is a stipulation collateral(incidental,

subsidiary / minor) to the main purpose of the

contract, the breach of which gives rise to onlyclaim for damages but not to a right to reject

the goods and treat the contract as repudiated


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Test to determine whether a

stipulation is a condition or a

warranty Breach fatal (irreparable damage) to the rights

of the aggrieved party or not

Entitlement to repudiation of the contract or

not

Breach of Condition can be treated as a

Breach of Warranty


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Condition and Warranties

Conditions and Warranties may be either

express or implied.

Express : expressly (words written or spoken)

provided by the parties

Implied (given by law)


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Implied Conditions Sec 14-17

Conditions as to title

In case of Sale, he has right to sell the goods; In

case of Agreement to Sell, he will have a right to

sell the goods at the time when the property is topass

right to sell contemplate not only that the seller

has the title to what he purports to sell, but also

that the seller has the right to pass the property. If

the seller's title turns out to be defective, the

buyer may reject the goods.


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Sale by Description Correspond to Description

Sale by Sample

Correspond the sample in quality, free fromdefect. Applies to latent defect (which are not

detectable on reasonable examination)

If contract is severable, the buyer may reject some

and accept others. If it is not severable, buyer hasto accept whole or reject whole.

Sale by Sample as well as by Description

Correspond to both sample and description


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Conditions as to fitness or qualityThis condition of fitness shall apply, if:

The buyer makes known to the seller the

particular purpose for which the goods are

required,

The buyer relies on the seller's skill or judgment,

The goods are of a description which he sellers

ordinarily supplies in the course of his business,and

The goods supplied are not reasonably fit for the

buyer's purpose.


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Condition as to Merchantability

Merchantable quality ordinarily means that the

goods should be such as would be commercially

saleable under the description by which they areknown in the market at their full value.

Condition as to Wholesomeness

The provisions or foodstuff must not onlycorrespond to their description, but must also be

merchantable and wholesome. It means that

goods must be for human consumption.


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Implied Warranties

Unless a contrary intention is expressed in a

contract, warranties are implied to be

followed in every contract of sale of goods

Warranty of Quiet Possession

The buyer shall have and enjoy quiet possession

of the goods. If the buyer's right to possession and

enjoyment of the goods is in any way disturbed asconsequences of the seller's defective title, the

buyer may sue the seller for damages for breach

of this warranty


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Implied Warranties

Freedom from Encumbrance (A mortgage or

other charge on property or assets)

The goods shall be free from any charge or

encumbrance in favor of any third party notdeclared or known to buyer before or at the time

when the contract is made. If the buyer is

required to discharge the amount of the

encumbrance it shall be a breach of this warranty

and the buyer shall be entitled to damages for the

same.


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Implied Warranties

Disclosure of dangerous nature of goods

The seller must warn the buyer about the

probable danger. If there is a breach of warranty,

the seller will be liable in damages


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Implied Conditions and Warranties

Implied conditions and warranties may be

excluded or varied by

Express agreement between the parties

The course of dealings between the parties

The custom or usage of trade (if it binds both the

parties to the contract)


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Exceptions to Doctrine of Caveat

Emptor

Condition as to quality or fitness for buyers

purpose

Condition as to merchantability

Condition as to wholesomeness

Conditions implied by customs

Sale under a patent or trade name Consent obtained by fraud


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Performance of Contract of Sale

Performance of respective duties of the seller

and the buyer

Performance comprises of two parts

Sellers duty to deliver the goods

Buyers duty to accept the goods and pay the

price


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Delivery of Goods

Voluntary transfer of possession from one person

to another

Actual (goods are handed over by the seller to

the buyer or his duly authorized agent),

Symbolic (where goods are bulky and incapableof actual delivery; it is as effective as actual

delivery eg. Handing over the key of warehouse),

Constructive (When a third person who is inpossession of goods of seller at time of sale

acknowledges to buyer that he holds the goods

on his behalf).


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Rules as to Delivery of Goods

Mode of Delivery (may be actual, constructiveor symbolic)

Delivery and Payment (acc. to terms of

contract)

Effect of Part Delivery

Buyer to apply for delivery (seller not bound

till buyer applies for delivery)

Place of Delivery (specified place, business

hours on a working day)


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Rules as to Delivery of Goods

Time of Delivery (fixed/reasonable time)

Demand of delivery to be treated ineffectual

unless made at a reasonable hour

Goods in possession of third party (third party

acknowledgement to buyer that he holds

them on behalf; not needed if goods are sold

by issue or transfer of document of title)

Cost of Delivery (costs incidental to making

delivery borne by seller; expenses incidental

to obtaining delivery borne by buyer)


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Transfer of Title by Non-Owners

Nemo dat quod non habet : No one can give

what he himself has not.

Exceptions under Sale of Goods Act, 1930

Estoppel (by his conduct the owner of the goods

may be precluded from denying the sellers

authority to sell)

Sale by a Mercantile agent (if he is in possession ofgoods or document of title with the consent of the

owner and acting in the ordinary course of

business)


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Transfer of Title by Non-Owners

Exceptions under Sale of Goods Act, 1930

Sale by one of several joint owners (possible with

the permission of other co-owners)

Sale by a person in possession of goods under a

voidable contract (buyer acquires a good titleprovided he buys them without notice of sellers

defect of title)

Sale by seller in possession after sale (if buyer

buys without notice of the previous sale, thebuyer gets a good title)

Sale by an unpaid seller (after stoppage of goods

in transit, buyer gets good title)


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Duties of Buyer

Take delivery of and pay for goods

To apply for delivery

To demand delivery at a reasonable hour

To take risk of deterioration

Bear liability in case of neglecting or refusing

delivery of goods (loss and charges for careand custody of goods)

Duty to accept installment delivery and pay

for it


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Duties of Buyer

Duty to intimate the seller where he rejects

the goods

Duty to pay damages for non-acceptance

Deliver the goods to carrier or wharfinger

Examine the goods delivered

h f


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Breach of Contract

Rights of buyer (Ifbreach is by seller)

Damages for non-

delivery

Specific performance

Remedy for breach

of warranty

Damages for breachof contract

Interest

Special damages

Rights of seller (Ifbreach is by buyer)

Suit for price

Damages for non-

acceptance

Damages for breach

of contract

Interest

Special damages


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Against the Goods

When the property in the goods has passed

Right of Lien

Right of stoppage in transit

Right of Resale

When the property in the goods has not

passed

Right of withholding delivery

Right of Lien


Right of Resale

Right of Lien


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Right of Lien Lien means a right in which a creditor has to

retain possession of goods until payment of the

price. It depends on actual possession and not

on title.

Lien arises in following cases

No stipulation (condition / provision) as to credit

Sale on credit and credit period expired

Insolvency of buyer

Termination of Lien

Delivery to carrier

Lawful possession by buyer

Waiver of lien by seller either expressly or impliedly

Ri h f i i


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Goods are deemed to be in course of transit from

the time when they are delivered to a carrier orother bailee for the purpose of transmission to

the buyer until the buyer takes delivery of them

from such carrier. Transit is not ended even if the seller refuses to

receive goods that are rejected by buyer

Unpaid seller may exercise his right of stoppageeither by taking actual possession of goods or by

giving notice of his claim to the carrier in whose

possession the goods are lying.


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Right of Resale

Goods are of Perishable nature

Seller gives notice to buyer of his intention to

resell but price not paid by buyer within

reasonable time; seller can resell goods and

recover damages for any loss from originalbuyer.

Seller does not give notice to buyer of his

intention to resell and resells goods; he cannotrecover damages for any loss from original

buyer and have to give profit if any on resale, if

any to the original buyer.


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Suit for price

When property in goods has passed to the

buyer and the buyer wrongfully refuses to pay

for the goods, seller may sue him for the price

of the goods.

When property is not passed and the goods

have not been appropriated to the contract, if

the price is payable on a certain dayirrespective of delivery, the seller may sue the

buyer

S it f d f


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Suit for damages for non-

acceptance

When buyer wrongfully neglects or refuses to

accept and pay for goods seller may sue for

damages.

Where there is no default of the seller and the

buyer wrongfully refuses to take goods within

reasonable time the seller is entitled to

recover Any loss caused by buyers refusal to take delivery

Any reasonable charge for the care and custody of

the goods

R di ti f C t t b f d


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Repudiation of Contract before due

date

Where buyer repudiates before due date

Seller may wait till due date and sue for damages

Seller may treat the contract as rescinded and sue

for damages

This rule is called Rule of anticipatory breach

of contract

S it f I t t


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Suit for Interest

Based on specific agreement about payment

of interest of price of goods from the date onwhich payment becomes due

In the absence of agreement, seller may

recover interest from such date as the sellermay notify to the buyer

Court may also award interest at such rate as

it thinks fit, on the amount of price to theseller in a suit by him for the price from the

date on which the goods are supplied or from

the date on which the price is payable.


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Auction Sale

Public sale where different intending buyerstry to outbid each other. Goods are ultimately

sold to the highest bidder. Auctioneer : agent

of the seller.

Rules in cases of a sale by auction (Sec. 64)

Where goods are put up for sale in lots, each lot is

deemed to be the subject of a separate contract

of sale

Sale is complete when auctioneer announces its

completion by fall of hammer or in other

customary manner


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Auction Sale


Right to bid may be reserved expressly by or on

behalf of the seller otherwise it shall not be lawful

for the seller to bid himself or to employ anyperson to bid

The sale may be notified to be subject to a reserve

or upset price (specified); otherwise the highest

bidder gets the goods

Auctioneer cannot sell goods on credit or accept a

bill of exchange


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Auction Sale


Sale is voidable at the option of the buyer, if seller

makes use of pretended bidding to raise the price.

Documents

Unit 1 Sale of Goods Act 1930