SALE OF GOODS ACT- 1930
• The Act came into force on 1st July 1930.
• Earlier the sale and purchase of good were regulated under Indian contract Act- 1872.
• Sec 4 Defines, “A contract of sale of goods is a contract whereby the seller transfers or agrees tp
transfer the property in goods to the buyer for a price.”
• Goods under sale of goods Act include only movable property.
Sec 2(7) defines goods as, “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 will be considered
goods”
DISTINCTION SALE AGREEMENT TO SELL
POINTS
Transfer of property Immediate transfer of property Transfer of property will take place in future
Execution Executed Contract Executory Contract
Existence of Goods Sale can only be in case of Existing Mostly in case of Future or Contingent goods
goods
Risk of Loss Risk of loss transfers to buyer with Risk of loss remains with the seller even in
transfer of ownership case of possession transfer
Breach Seller can sue for price, when buyer is Seller can sue for damages only. Because title
unable to pay in goods has not been transferred
Right to resell Right to resell can not be exercised. Right to resell can be enforced and new buyer
Exception: unpaid seller gets good title.
Original buyer can sue for damages only
Insolvent buyer The seller has to deliver goods to The seller is not bound to part with the
buyer and can sue for price goods.
Insolvent seller If seller is insolvent, buyer can recover Buyer can only claim the price he has paid not
goods from him goods, because title has not yet transfered
Types of goods
1. Existing Goods
Those goods which are possessed and owned by seller at the time of sale.
Specific goods:
Goods that are “identified and agreed upon” when the contract of sale is formed.
e.g. you want to sell your mobile phone online. You put an advertisement with its picture and information. A buyer
agrees to the sale and a contract is formed. The mobile, in this case, is specific good.
Ascertained goods:
Goods which have been selected from a larger set of goods.
e.g. you have 500 apples. Out of these 500 apples, you decide to sell 200 apples. To sell these 200 apples, you will
need to separate them from the 500 apples.
Unascertained goods:
These are the goods that have not been specifically identified but have rather been left to be selected from a larger
group. For example, from your 500 apples, you decide to sell 200 apples but you don’t specify which ones you want
to sell.
2. Future Goods
In sec 2(6) of the Act, future goods have been defined as the goods that will either be
manufactured or produced or acquired by the seller after the contract of sale is made.
The contract for the sale of future goods will always be an agreement to sell.
• Executory Contract
e.g. you have an apple orchard with apples in it. You agree to sell 1000 apples to a buyer after
the apples ripe. This is a sale that has to occur in the future but the goods have been identified
already and the agreement made. Such goods are known as future goods.
3. Contingent Goods
Goods the acquisition of which depends upon the contingency which may or may not occur. These
goods are part of a sale contract that has some contingency clause in it.
• Executory Contract.
e.g. if you sell your apples from your orchard when the trees are yet to produce apples, the apples are
a contingent good. This sale is dependent on the condition that the trees are able to produce apples,
which may not happen.
Essentials of sale of goods Act
1. Two parties: There must be 2 distinct parties i.e. a buyer and a seller, to affect a contract of sale and they
must be competent to contract.
2. Goods: There must be some goods the property in which is or is to be transferred from the seller to the
buyer. The goods which form the subject-matter of the contract of sale must be movable.
3. Price: Price is an essential ingredient for all transactions of sale and in the absence of the price or the
consideration, the transfer is not regarded as a sale. It has been held that price normally means money.
4. Transfer of property: There must be a transfer of general property as distinguishes from special property in
goods from the seller to the buyer.
e.g. if A owns certain goods he has general property in the goods. If he pledges them with B, B has special
property in the goods.
Effects of destruction of goods
1. Goods perishing before making of contract (Sec 7):
A contract for the sale of specific goods is void if at the time when the contract was made, the goods have,
without the knowledge of the seller, perished.
The same would be the case where the goods become so damaged as no longer to answer to their description in the
contract.
e.g. Crops in transit contaminated by sea water during voyage
Rules for Void:
a. Mistake as to subject matter
b. Impossibility of performance
2. Goods perishing after the agreement to sell but before the sale is effected (Sec 8):
An agreement to sell specific goods becomes void if subsequently the goods, without any fault on the part of
the seller or the buyer, perish or become so damaged without fault of either of the parties.
Rules for Void:
c. Impossibility of performance
Exception:
In case of unascertained goods, seller is not relieved from performance otherwise can be sued for damages.
Rights of Buyer
• Right to have delivery as per contract
• Actual Delivery
• Constructive Delivery
• Symbolic Delivery
• Right to reject goods:
• Reject whole lot
• Accept whole lot
• Accept quantity he ordered and reject the rest.
• Right to repudiate:
• If delivery is not made according to mode prescribed
• Delivery in Instalment when instalments are not mentioned and Vice versa.
• In case of defective delivery
Cont…
• Right to notice of Insurance: notice of dispatch of goods, so that he can get the goods insured
• Right to examine goods: seller has to provide proper time for inspection of goods before
acceptance of delivery is made. He can not later claim damages and repudiate contract.
• Right against Seller:
Suit for damages
Suit for price paid
Suit for specific performance
Suit for breach of warrant : suit for diminution of price. i.e. price with warrant & price
without warranty
Sue the seller for damages for breach of warranty
Unpaid Seller: A seller is unpaid when;
a. whole price has not been paid and payment is due
b. A negotiable instrument is given as a condition of payment
Rights of Unpaid Seller:
Right against Goods
1. Right to Lien:
It is to retain the possession of goods until the payment is made.
Conditions:
a. Goods sold without stipulation as to credit
b. Goods sold on credit and credit period has expired
2. Right to Stoppage in transit:
Can stop goods in transit.
Conditions:
a. when goods are in transit & seller has control over carrier
b. Goods not delivered to buyer yet
3. Right to resale:
the Unpaid seller can resell goods where;
a. goods are perishable in nature
b. giving notice to buyer regarding intention to sell and buyer doesn’t act within reasonable time
c. where seller reserves right to resell in case of default of buyer
Right Against Buyer:
1. Suit for Price:
Where:
a. Goods have been delivered
b. Payment is due on certain date irrespective of delivery
2. Sue for damages for non-acceptance:
where buyer wrongfully neglects to accept the delivery and pay, Seller can sue for damages caused.
3. Repudiation of contract before due date:
where buyer repudiates before due date, seller may;
a. Treat contract as subsisting and wait till delivery date
b. Treat contract rescinded and sue for damages.
4. Sue for Interest (Case of Special damages):
On specific agreement between parties as to pay interest on price unpaid, when it becomes due. Seller may;
a. Charge interest on price from date when notified to buyer
b. Court can charge interest on price to be paid by buyer from the date when it was actually due.
CASE STUDY
Bathroom city washed its hands off the problem
Simon Bell, of King’s Lynn, Norfolk, has been battling with Bathroom City, Birmingham, over a cracked
bathroom unit for six months after buying a shower tray, cabinet and basin in March. The delivery did not
turn up for a month, despite a promise that it would arrive within days. Mr. Bell, left, who is a former heating
and plumbing engineer, says: “When the delivery was made I inspected the goods and could see nothing
wrong. But because the delivery was so late I missed my opportunity to fit it immediately.”
It wasn’t until a couple of days later that he noticed a “hairline crack” on the basin when he took it out
of the box. He sent a photograph of the damage to Bathroom City, which said that there was nothing it could
do because he had not reported it within two da
ys of delivery. The company also claimed that it did not look like a manufacturing fault but damage caused
when fitting the taps. However, Consumer Direct says that it is the duty of Bathroom City to prove that it
was not responsible; if it cannot, then the company owes Mr Bell a replacement or repair. Mr. Bell says:
“Bathroom City has refused to budge and my e-mails and letters have been ignored. I have fitted many
bathroom suites over the years and have never broken anything. What’s more, I know that it is impossible to
inflict this type of damage with modern taps.”
After being contacted by Times Money, Bathroom City offered to replace the basin as a goodwill
gesture, but maintains that it has “clear proof” that it did not damage the basin because “Mr. Bell clearly
states that when it was delivered he checked the goods over and found no initial fault”.
1. Identify the elements of sale of goods
• Two parties
• Goods
• Price
• Transfer of general property
2. Points in which the case supports or deviates the rules of sale of goods act.
• The goods where not delivered as promised by the promise (the bathroom city)
• Stipulation as to time: In a contract of sale, stipulations other than those relating to the time of payment are
regarded as of the essence of the contract.
• The mode of payment is not mentioned the given case
• Lack of mutual consent:
The bathroom city refused to respond to the e-mails and letters of Mr. Bell. Mr. Bell clearly states that when it was
delivered he checked the goods over and found no initial fault”
Condition:
• A condition is a stipulation which is essential to main purpose of the contract.
• It is any statement representation made by one party with reference to goods forming the part
or basis of entering into contract.
• Non fulfilment of condition can be considered as failure to perform and its breach gives rise
to right to treat contract as repudiated.
• A stipulation may be a condition, though called a warranty in the contract.
• Condition can be Express or Implied condition.
Example:
‘X’ wants to purchase a car from ‘Y’, which can have a mileage of 20 km/lt. ‘Y’ pointing at a
particular vehicle says “This car will suit you.” Later ‘X’ buys the car but finds out later on that
this car only has a top mileage of 15 km/ liter. This amounts to a breach of condition because the
seller made the stipulation which forms the essence of the contract.
Warranty:
A warranty is a stipulation which is collateral to the main purpose of the contract.
Its non performance will not affect the basis of contract, although it must be performed.
The Injured party can claim damages in case of breach of warranty. But, the contract can not be
considered as repudiated.
Example:
when you buy a new car from a car dealer, the warranty states that the car works. If the car
doesn't work, the warranty gives the owner the right to have the dealer fix the car under certain
conditions (length of time, cause of damage, etc.). These conditions are typically spelled out in
the warranty.
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