Unit -6

Meaning and features of sale of goods:- The contract of sale of

goods is a contract where by the seller transfers the property in
goods to the buyer for a price.
Section 40 of NCA 2056 states, if a seller transfers immediately
or agrees to transfer in some future date the goods for a price, it
is said to be the contract relating to sale of goods.
Where under a contract of share the property in the
goods is transferred from seller to the buyer, the contract is
called a sale. There are certain specific which a contract of sale
must carry with it they are:1) Parties:- There must be two parties i.e. buyer & seller. The
parties must be competent to contract as under the
NCA,2056.
2) Movable goods:- This refers to two things, sale refers to
the sell of particular movable goods and sale refers to the
sale of movable goods for money.
3) Price:- The price of goods must be money. Where goods
are exchanged for goods it is not sale.
4) Change of ownership:- Sale refers to the change of
ownership of goods from seller to the buyer. For a thing to
be called sale, ownership of goods must have been
transferred.
5) Verbal or written command:- A contract of sale may be
made in writing or by word of mouth i.e. may be express or

it may be implied or from the conduct of the parties or from

the course of dealings between the parties.
6) Terms of contract:- The conditions may have to be
fulfilled by the seller or by the buyer.
Types of goods:- Goods means every kind of
movable properties which can be bought or sold.
From sale point of view goods may be classified into
3 classes viz;.
1) Existing goods :- Existing goods means the good which
are either owned or possessed by the seller at the time of
contract of sale.
Existing goods are further classified into:a) Specific goods:- Specific goods are the goods identified
and agreed upon at the time the contract is made.
Ex:- A particular furniture, a particular picture of a person etc.
b) General or unascertained goods:- The goods which are
indicated only by description and not particularized or
identified separately are general goods.
2) Future goods:- The goods which do not exist at the time
of the contract of sale but will be acquired, produced or
manufactured at a later date are known as future goods.
3) Contingent goods:- The goods which do not exist at the
time of making a contract, but there is possibility of
acquisition in future are called contingent goods.

 Meaning of condition:- Condition is a stipulation

essential to the main purpose of the contract of sale of
goods. The present contract act of Nepal is silent even
about the term condition but the indian sale of goods
act 1930 has defined the term condition clearly.
According to section 12.2 of the act, condition is a
stipulation essential for the main purpose of the
contract , the breach of which gives the rice to a right
to treat the contract as repudiated.
The definition reveals that a condition in a contract of sale is of
stipulation of primary nature. This is a stipulation or term which
remain essential for obtaining the main purpose of such contract.
In case of a breach of conditions, the aggrieved party has the
right to repudiate the contract. He can demand the damage for
loss the price of the goods on the ground of repudiation of the
whole contract.
Example:- A orders B to deliver 100 ton of A quality rice
within 21st of august. B accepts the offer. In this example, to sell
the rice is the main purpose of the contract and to deliver the
rice within 21st of august is the condition of contract.
If B delivers B quality rice instead of A quality rice, A can
return the rice to B and rescind the contract.
Kinds of condition:-The condition may be either
express or implied:-

1) Express condition:- The conditions which have been

expressly (by using words in written or oral form ) agreed
upon by the contracting parties are called express
conditions.
2) Implied condition:-Implied conditions are these which are
not expressly provided in clear words in the contract by the
parties at the time of forming the contract of sale.
In this respect, NCA 2056 in section 44, 45, 46, & 47 has
stipulated some clear provisions. Generally, the following
matters are known as implied conditions in the contract of sale:a)condition in a sale of goods by description:- Section 44.1 of
NCA 2056 states that if some goods are sold by mentioning in
the contract, the brand name, trademark or other specification,
the goods shall correspond with the same brand name, trade
mark for other specification.
b) sale by sample as well as by description (section 44.2) :- If
the sample & the description like name, brand, trade mark or
other specification of goods to be sold have been mentioned in
the contract, the bulk of these good correspond not only to the
sample but also to their name brand trade mark or their
specification as noted in the contract.
c) condition as to title of goods:-According to section 45.1 of
NCA 2056 unless otherwise mentioned in the contract , incase
of sale the seller has a right to sell the goods & incase of an
agreement to sale he will have a right to sell them and such

goods will be free from control & possession of any other

person.
d) condition in a sale by sample (section 47):- Where goods
are by sample, they must be as per the sample showed at the
time of creation of the contract.
e) condition as to merchantable quality:- As stated in section
16.2 of indian sale of goods act 1930, when goods are bought by
description, there is an implied condition that the goods are sold
of merchantable quality.
f) condition as to wholesomeness:- Condition as to
wholesomeness means that the article sold should fit for human
consumption. In case of eatable or food stuffs in addition to the
condition of the merchantable quality, there is another implied
conditions that the goods shall be wholesome.
Meaning of warranty :Warranty is a stipulation in contract of sale, but it is collateral to
the main purpose of the contract. A warranty has not been
defined in NCA 2056. In the respect, the definition by the indian
sale of goods act 1930 has to be adopted . section 12.3 of the act
has defined the term as warranty is a stipulation collateral to
the main purpose of the contract, the breach of which gives rise
to a right to claim for damages but not a right to reject the goods
& treat the contract as repudiated. From the above definition. It
is clear that a warranty is also a term but not a major component.
It is only a secondary component, despite the fact that it is

necessary for the performance of the contract. In cash of a

breach of warranty, the aggrieved pasty can only claim damage
& cannot be treated as a repudiated contract.
Kinds of warranty:Like condition, warranty may also be either express or implied.
1) Express warranty:- Warranty is one stated in many words
as the basis of the contract of sale is called an express
warranty. Therefore, conditions upon which the parties
while entering to contract are expressed warranties.
2) Implied warranty:- Implied warranty are those which are
not expressly provided in clear words in the contract by
parties. Such warranties are implied by the low unless the
party aggrieved to the contrary.
Kinds of implied warranty:a) Warranty as to quite possession :- A warranty as to quite
possession is implied in the contract that the buyer stall
have an enjoy. Quite possession of the goods.
b) Warranty of freedom from encumbrances:- There is a
warranty implied in the contract of sale that the goods must
not be subject to any charge or right in favor of a third
party.
c) By usage of trade:- According to section 16.3 of ISC,A
1930, an implied warranty as to quality or fitness for a
particular purpose may be annexed by the usage of the
trade.

d) Disclosure of dangerous nature of goods:- There is

another implied warranty in the contract of sale, that if the
sale are of dangerous nature & the seller knows, the buyer
is ignorant about them, the seller must warn the buyer of
the probable danger.
Distinction between condition and warranty.
Basis of difference
1) Essential
versus
collateral
2) Right of
aggrieved
party
3) Performance
of contract.

4) As to
treatment

5) Liability

Condition
Condition is a term
which is essential to
the main purpose of
the contract.
The aggrieved
party can repudiate
the contract of sale.
Incase of breach of
condition, the
aggrieved party is
not bound to
perform the
contract.
Breach of condition
may be treated as
breach of contract.
In repudiation of a
contract, the
aggrieved party
should not fulfill
the obligations and

Warranty
Warranty is only
collateral to the
main purpose of the
contract.
The aggrieved party
can claim damage
for the loss only.
Incase of breach of
warranty, the
aggrieved party is
bound to perform
the contract.
Breach of warranty
may not be treated
as breach of
contract.
In repudiation of a
contract the
aggrieved party
cannot be
discharged from his

be discharged from
the liability.

liability without
fulfilling his
obligations.

Meaning of transfer of ownership:Transfer of ownership implies to the passing of property in

goods by seller to the buyer. ownership is a legal right over the
goods of a person. It is transferred by the contract of sale. In a
sale, any risk of the goods is transferred with the ownership of
goods because risk follows ownership. As a matter of fact, the
question as to when does property in goods passes from seller to
the buyer will be mentioned by them in the contract itself. If it is
clearly mentioned in the contract both the parties should follow
it. In absence of such agreement, the parties should follow the
legal provisions as laid down by section 48 and 53 of NCA,
2056. The rules regarding transfer of ownership are as follows:1) Sale of unascertained and future goods :- According to
section 18 of sale of goods act 1930 of indian act, when
there is a contract for the sale of unascertained goods or
future goods, property in goods is not transferred to the
buyer until & unless the goods are made unascertained.
2) Intention of the parties:- The time for the transfer of
ownership from seller to the buyer is usually fixed by
intention of the parties. If they express their intention in
cleat words in the contract itself, no problem arises and

they intend to transfer. It depends on the intention of the

parties. But if the intention of the parties cannot.
a) Sale of specific goods:- While making contract for the sale
of specific goods, generally the parties agree upon the
questions like when, how and where the ownership of
goods is to be transferred.
b) When goods are to be delivered:- According to section
48.5 of NCA, 2056, unless otherwise mentioned in the
contract, the title or ownership of goods is supposed to be
transfer from seller to the buyer at the very moment when
they are delivered to him.
In the absence of agreement between the parties as regards to the
transfer of ownership, the following rules are to be followed:i)

When goods are in deliverable state:- According to

section 48.2 of NCA 2056, unless otherwise provided
for in the contract, if some definite goods are in a
deliverable state & can be dispatched immediately, the
ownership of such goods is supposed to be transferred
from seller to the buyer after concluding the contract or
paying their price.
ii) If the seller has to do something :- When a seller has
something to do for bringing the goods in deliverable
state, ownership will be passed to the buyer only after
making them deliverable.
iii) When the price of goods is to be ascertained:- If a
contract for the sale of specific goods & the goods are in

a deliverable state but for the determination of the price,

either the buyer or the seller has to examine, measure or
to do any other thing to the goods, the ownership passes
to the buyer only after such thing has been done and the
notice of such thing has been give to the buyer,
otherwise the ownership does not pass the seller to the
buyer.
iv) Right of the buyer to inspect the goods :- When the
goods are delivered to the buyer, he should have the
reasonable opportunity to inspect them to ascertain
whether they correspond with that mentioned in the
contract or not. Until the goods are inspected or accepted
by the buyer the property in goods does not pass from
seller to the buyer.
3) Delivery of goods to the carrier:- The general rule is that
the ownership may pass to the buyer while delivering to
goods for the purpose of transmission to the buyer through
to goods for the purpose of this respect, the reservation of
right of disposal plays a vital role.
4) Goods sect on approval:- The ownership of the goods
may pass to the buyer if the goods are sent on approval or
on sale or return to the buyer after fulfilling some condition
by him.
Transfer of title by non-owner:The general rule as regard to the transfer of title on sale of goods
is that the seller cannot transfer to the buyer or title better than

what he himself has. This rule is based on the latin maxim

nemodet quod non habit, which means than no one can give
what he has not got.
NCA 2056, has not directly recognized it through its judicial
decision that no one can pass the better title than he acquired.
Hence a person who has no title to the goods can convey none.
A non owner is a person who has no ownership over the goods.
There are of course some exceptions to the rule of non- owner
cannot make a valid sale or transfer of title. That means
sometimes in some conditions, a buyer may enjoy better title to
the goods than a seller. The conditions are briefly discussed
below:1) Sale by a merchantile agent:- A merchantile agent only
after having authority from the owner can sale the goods to
the buyer. In such a case the buyer gets a good title to the
goods.
2) Sale by one of the co-owner:- If the goods belong to more
than one owner, co-owner can give a valid title to the
buyer.
3) Voidable contract:- A person who has obtained
possession of goods under a voidable contract can give a
valid title to the buyer before such contract is rescinded.
4) Sale by a seller:- Although the ownership of goods passes
to the buyer as soon as the goods are bought, if they are still
in the sellers possessions and he sells them to the buyer.
He gets a good title to them.

5) An agreement to sale:- Where goods are sold into

possession of the buyer after agreement to sell, the contract
is also valid.
6) Re-sale by unpaid seller:- If the goods are re-sold by an
unpaid seller the buyer gets a goods title over the goods.
7) Transfer of title by estoppel:- Where the seller words or
conducted has represented to the buyer that, he has the
authority to sale the goods there is valid sale.
8) Sale by pledgee:-The buyer of the goods enjoys a better
title to the goods then the pledgee in certain circumstances.
9) Sale by official assignee :- On declarations of a person as
insolvent, the official assignee, who is not true owner of
goods, sell the goods of such insolvent person. In such
circumstance the buyer enjoys better title than that of
official assignee.
10)
Sale of finders of goods:- A finder can make a valid
sale & the buyer of the goods may enjoy better title than
that of the finder.
Performance of contract of sales:The performance of contract of sale means the performance of
the respective duties of the seller & the buyer as per the terms &
conditions of the contract.
As stated in section 31 of the indian sale of goods act 1930, it is
the duty of the seller to deliver the goods & the buyer to accept
& pay for them in accordance with the terms of the contract of
the sale.

When, where & how the seller is to deliver the goods to the
buyer & when where & how , the buyer is to pay the price of the
goods to the seller will be mentioned in the contract. In the
absence of such things mentioned in the contract the rules laid
down by the law relating to the sale of goods have to be
followed by both of them as the implied conditions. Thus, the
performance of a contract of sale of goods is to deliver the goods
from the seller and making a payment for the goods by the
buyer.
Meaning of delivery:Simply, the term delivery means a transfer of possession. If is a
process under which a possession of goods transfers voluntarily
possession. In favor of another.
F. pollocle defines the term delivery as, a voluntary possession
in favor of another.
NCA 2056 has not defined the term delivery where as the indian
sale of goods act 1930 has defined these terms. According to
section 2 of the act, delivery means a voluntary transfer of
possession from one person to another.
Thus, the definitions shows that delivery is the transfer of
possession & it is voluntary. Hence, in the absence of voluntary
transfer of possession of goods, there is no delivery. Delivery
requires two parties having possession & transferring possession
because it is a bilateral transaction.

 Rules regarding delivery under the contract of sale

of goods :In respect of performance of contract of sale, the rules regarding
delivery are discussed below:1) Modes of delivery:- Delivery of goods may be made in any
of the following modes:i) Actual delivery:- The actual delivery is that where the
goods are physically handed over by the seller to the
buyer or his authorized agent.
ii) Symbolic delivery:-When an actual delivery is not
possible due to the bulky or heavy quantity of goods but
the means have been delivered, it is a symbolic delivery.
iii) Constructive delivery:- When a delivery is made
without any change in the actual possession of goods i.e.
constructive delivery.
2) Possession of the buyer:- The buyer should be in position
to exercise some degree of controls over the goods either
directly or through an agent.
3) Delivery & payment:-Delivery of the goods & payment of
the price must be according to the terms of the contract.
4) Application for delivery:- Unless otherwise agreed, the
buyer must apply for delivery. The seller is not bound to
deliver goods without any application from the buyer.
5) Phase of delivery:- The parties are free to determine any
place where the goods are to be delivered.

6) Time for delivery:- Under the contract of sale, the seller is

bound to send the goods within the prescribed time in the
contract or within a reasonable time.
7) Expenses of delivery:- Unless otherwise agreed, the
expenses of putting goods into a deliverable state shall be
borne by the seller.
8) Effect of partial delivery:- A delivery of parts with an
intention of separating it from the whole lot does not
amount as the delivery of the remainder.
9) Demand of delivery:- Demand or tender of delivery must
be made at a reasonable hour by the buyer, what is
reasonable hour is a question of fact.
10)
Delivery of carrier:- Unless otherwise agreed, the
seller must send the goods to the buyer with the notice of
the insurance of the goods in case of a delivery of carrier.
11)
Short delivery:- Where the seller delivers to the buyer
a quantity of goods less than contracted to sell, the buyer
may reject the goods.
12)
Excess delivery:- Where the seller delivers to the
buyer a quantity of goods larger than contracted to sell, the
buyer may reject either the rest or whole or may accept the
contracted quantity & reject the rest.
13)
Mixed delivery:- Where the seller delivers to the
buyer, the goods contracted to sale, mixed with goods of a
different description not included in the contract, the buyer
may accept the goods which are in accordance with the
contract and reject the rest or the whole.

14)
Installment delivery (section 54.4):- As stated in
NCA 2056, unless otherwise provided for in the contract,
the buyer is not bound to take the goods in installment.
Unpaid seller
An unpaid seller is person, who has not been paid or tendered
the price of the goods or negotiable instrument that is
dishonored. NCA 2056, has not defined the term unpaid seller.
Section 45.1 of sale of goods act of india 1930, has defined the
term unpaid seller thus, the seller of goods is deemed to be an
unpaid seller (a) when the whole of the price not been paid or
tendered or (b) when a conditional payment was mode by a bill
of exchange or other negotiable instrument has been
dishonored.
Thus, it is clear from the definition stated above that the seller
becomes unpaid seller as soon as he does not get cash value for
his goods from the buyer in time mentioned in the contract. For
example:- A sells goods to B for RS.1000. A becomes unpaid
seller in any of the following cases:i)
ii)

If B does not pay whole of the price in due date.

If the payment is made by B by means of bill of
exchange or promisor note & the instrument is
dishonored on the due date.
Rights of unpaid seller

A seller who fails to get cash value for his goods from the buyer
in time Is said to be an unpaid seller. So, the unpaid seller
exercises or enjoys the following rights:1) Right against the goods:- Under this, unpaid seller is
entitled to exercise the following rights:a) Right against the goods:- Lien is a kind of right which the
unpaid seller exercises to retain the possession of goods
until the full price is received.
b) Right to stoppage of goods in transit:- The unpaid seller
can exercise the right of stoppage of goods in transit when
the buyer become insolvent. The seller has posted with
possession & they are neither in possession of the seller nor
that of the buyer.
c) Right of re-sale:- The unpaid seller can resale the goods to
anybody without or with notice with the original buyer &
cover from him, damages for any loss suffered by breach of
contract.
2) Right against the buyer personality:- If after sale, the
buyer has already received the goods but doesnt pay the
price on the due date, the seller enjoys the following right
against the buyer:a) Suit for price:- When goods are passed to the buyer but
the later doesnt pay the price at the prescribed time, the
seller can sue the buyer.

b) Suit for damage:- When the buyer wrongfully neglects to

receive or refuses to accept the agreed goods, the seller
may demand the damage by filing a suit.
c) Suit for interest:- According to section 61 of ISGA (indian
sale of goods act ) 1930, if the buyer violates the contract,
while filling a suit for the price, the seller can sue him for
interest at a reasonable rate for the time delayed.