Sales of Goods Act

The Sale of Goods Act, 1939

Essentials of a contract of sale

(A) Two parties

(B) Goods – The subject matter of a contract.
(C) Transfer of property.
(D) Monetary consideration-price.
(E) Essential elements of a valid contract.
(F) A Contract of sale includes sale as well as an
agreement to Sell.

Goods:
(a) Existing goods,
(b) Future goods,
(c) Contingent goods.

(a) Existing goods

Existing goods are those goods that are owned and
possessed by the seller at the time of sale. These may
be of three types, which are as follows:
(1) Specific goods: Specific goods are those goods
that are identified and agreed upon at the time
of a contract of sale is made.
(2) Ascertained goods: Goods identified or which
become ascertained subsequent to the
formation of the contract of sale.
(3) Unascertained or generic goods: The goods that
are not identified and agreed upon at the time of
the contract of sale are the unascertained or
generic goods. Such goods are defined by
description only and may form a part of a lot.

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Future goods
Future goods are those that are to be manufactured,
produced or acquired. A seller does not actually
possess the future goods at the time of the sale. A
contract of present sale of future goods purports to
operate as an agreement to sell and not a sale.

Contingent goods
Contingent goods are a type of future goods. Goods, the
acquisition of which by the seller depends upon a
certain contingency are called contingent goods.

Effects of destruction of goods or perishing of goods

[Sections 7 and 8]
(a) The contract must be an agreement to sell
and not of actual sale.
(b) The loss must be specific.
(c) The loss is not caused by the wrongful act
or default of either buyer or seller.
(d) The goods have been perished before the
risk is passed to the buyer.

Ascertainment of price [Sections 9 & 10]

Stipulation as to time [Section 11]

1. Stipulation relating to time of payment and
2. Stipulation not relating to time of payment but to
other things like delivery of goods etc.

Transfer of title-Sections 27-30

 Sale by mercantile agent

 Sale by one of the joint owners

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 Sale by a person in possession under a voidable

contract
 Sale by one who has already sold the goods but
continues in position thereof
 Sale by buyer opting possession before the property
in the goods vested in him
 Sale by an unpaid seller
 Sale under the provisions of other Acts

Transfer ownership and delivery of goods

Passing of property-Sections 18-26

Essentials of appropriation
Reservation of right to disposal-Section 25
Passing of risk-Section 26

Exceptions to the doctrine of “Caveat Emptor”

Sale and agreement to sell (points of distinction)

(i) Nature of Contract

(ii) Transfer of ownership of property
(iii) Types of goods or nature of property
transferred
(iv) General and particular property
(v) Consequences of breach
(vi) Risk of loss
(vii) Seller’s right of reselling the goods
(viii) Seller’s insolvency
(ix) Buyer’s insolvency

Sale and Hire-purchase Agreement

• Nature of contract and ownership
• Termination of a contract

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• Implied conditions and warranties

• Payment in installments
• Insolvency of the buyer and risk of loss
• A sale is subject to the imposition of sales tax at
the time of a contract of sale while sales tax is
not leviable on a hire purchase until it is finally
converted into a sale.

Sale and bailment

Sale and barter exchange

Difference between a condition and a warranty

(a) Purpose
(b) Difference as to breach
(c) Difference as to treatment
(d) Essence of the contract of sale
(e) Damages

Express & Implied conditions in a contract of sale

(Sections 14-17)

a. Condition as to title [Section 14(a)]

b. Condition as to sale by description [Sec.15]
c. Condition as to sale by description as well as by
sample
d. Condition as to sale by sample [Section 17]
e. Condition as to quality or fitness [Sec. 16(1)]
f. Condition as to merchantability [Section 16(2)]
g. Condition as to wholesomeness
h. Condition implied by custom [Section 16(3)]

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Implied Warranties in a Contract of Sale

(1) Implied warranty of quiet possession [Section

14(b)]
(2) Implied warranty of freedom from encumbrance
[Section 14(c)]
(3) Implied warranty as to quality or fitness by usage of
trade [Section 16(3)]
(4) Implied warranty to disclose dangerous nature of
goods

Delivery of goods

(a) Actual delivery

(b) Symbolic delivery
(c) Constructive delivery or delivery by allotment

Rules regarding delivery of goods

(a) Mode of delivery [Section 33]

(b) Delivery of goods and payment of price are
concurrent conditions [Section 32]
(c) Effect of part delivery of goods [Section 34]
(d) Buyer to apply for delivery [Section 35]
(e) Place of delivery of goods
(f) Risk of delivery [Section 40]
(g) Time of delivery [Section 36(2) and (4)]
(h) Goods in possession of a third person or party
[Section 36(3)
(i) Cost of delivery of goods [Section 36(5)]
(j) Delivery of wrong quantity [Section 37]
(k) Installment deliveries of goods [Section 38]

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(l) Delivery to carrier or wharfinger [Section 39]

(m) When an acceptance is complete on delivery of
goods [Section 42]
(n) Buyer not bound to return rejected goods [Sec. 43]
(o) Liability of buyer for neglecting or refusing delivery
of goods [Section 44]

Rights of unpaid Seller and remedial measures:

The conditions mentioned below must be fulfilled before

a seller can be deemed to be an unpaid seller:

(a) He must have sold goods against cash and the

price must be due.
(b) He must be unpaid either wholly or partly.
(c) He must have an immediate right or action for
the price.
(d) He must have not refused payment when
tendered.
(e) A bill of exchange or any other negotiable
instrument was received but dishonored.

Rights of an unpaid seller and remedial measures:

Under the Sale of Goods Act, the unpaid seller gets

certain rights, which can be broadly classified under the
following two heads:

(a) Rights against goods; and

(b) Rights against the buyer personally.

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(a) Rights of unpaid seller against the goods sold:

(i) Where the property in the goods sold has been

passed, he has the following rights [Section 46
(1)].

(1) Right of Lien [Section 47 to 49].

(2) Right of stoppage of goods in transit
[Section 50 to 52].
(3) Right of resale [Section 54].

(ii) Where the property in the goods has not been

transferred, he gets the following two rights
[Section 42(2)].

(1) Withholding the delivery of goods, and

(2) Stoppage in transit.

(b) Rights against the buyer personally:

Following four rights, the unpaid seller gets against the

buyer:

(1) Suit for price [Section 55].

(2) Suit for damages [Section 56].
(3) Repudiation of contract [Section 60].
(4) Suit for interest [Section 61].

The rights of the unpaid seller also can be shown

diagrammatically as follows:

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Rights of an unpaid seller against the goods

Right of lien [Section 47 to 49]

Termination of Lien [Section 49]

The unpaid seller loses his lien on the goods sold:

(a) when he delivers the goods to a carrier or

other bailee for the purpose of transmission to
the buyer without reserving the right of
disposal of the goods;
(b) when the buyer or his agent lawfully obtains
possession of the goods;
(c) by waiver of his lien. This means the unpaid
seller loses his lien on the goods when the
seller voluntarily abandons his right of lien on
the goods. He may do this either expressely or
impliedly.

Right of stoppage of goods in transit

Duration of transit [Section 51]

How stoppage in transit is affected [Section 52]

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Distinction between right of lien and right of stoppage in

transit

Right of lien Right of stoppage in transit

1) The right of lien is 1) The right of stoppage
exercised by the in transit can be
unpaid seller when the exercised when goods
goods are in his are in transit or may
possession, actual or be in the possession
constructive. If he of the middleman.
loses the possession,
he loses the right of
lien.

2) The right of lien is 2) Unpaid seller’s right to

exercised when the stop the goods in
buyer is able to pay transit arises only
but does not pay. when the buyer is
insolvent.

3) Right of lien comes to 3) Right of stoppage in

an end when the seller
loses the possession
of goods.
transit commences
when the seller loses
the possession of the
goods sold and it
continues until the
buyer acquires their
possession.

4) In the right of lien, the 4) In the right of

possession is retained stoppage the goods in
by the seller. transit, possession is

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regained.

Effect of pledge or sub-sale by the buyer [Section 53]

Right of resale [Section 54]

If no notice of re-sale is given to the buyer, the unpaid

seller is not entitled:

 to recover any loss on re-sale of the goods; and

 to retain surplus, if any on the resale;

Right to withhold the deliver of goods [Section 46(2)]

Rights of an unpaid seller against the buyer personally

The unpaid seller has the following four rights available

against the buyer personally:

(a) Right to sure for prices.

(b) Right to sure for damages for non acceptance
(c) Right to repudiate the contract
(d) Right to sure for interest.

Rights of parties in case of breach of contract

 Suit for non-delivery

 Suit for specific performance-Section 58
 Suit for damages for breach of warranty-Section 59
 Suit for recovery of price-Section 61

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Auction Sale [Section 64]

In the case of a sale by auction-

(1) Where goods are put up for sale in lots, each

lot is prima facie deemed to be the subject of a
separate contract of state;
(2) The sale is complete when the auctioneer
announces its completion by the fall of the
hammer or in any other customary manner;
and, until such announcement is made, any
bidder may retract his bid;
(3) A right to bid may be reserved expressly by or
on behalf of the seller, and where such right is
expressly so reserved, but not otherwise, the
seller or anyone person on his behalf may,
subject to the provisions hereinafter
contained, bid at the auction;
(4) 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 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; and any sale
contravening this rule may be treated as
fraudulent by the buyer;
(5) The sale may be notified to be subject to a
reserved or upset price;
(6) If the seller makes use of pretended bidding to
raise the price, the sale is voidable at the
option of the buyer.

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