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Sale of goods Act, 1930

Definition
Contract of Sale is a contract between buyer &
seller intending to exchange property in goods
for a price.
According to Sec 4 (1):
A Contract of Sale of goods is a contract where
by the seller transfers or agree to transfer the
property in the goods to the buyer for a price.

Essential Elements

Elements
1. Two parties: To form a contact, there must be at least two parties. So in a
contract of sale also there must be two parties i.e a seller & a buyer. One
person cannot act both as a seller & a buyer.
2. The subject matter of the contract must be goods: so goods means every
kind of moveable property other than actionable claims & money; & includes
stocks , shares, growing crops, grass &things attached to or forming a part of
the land, are the goods.
3. Price : A price in money ( not in kind ) should be paid or promised. Money
means currency in circulation. goods are sold for consideration which may be
in the form of partly in money n partly of goods.
4. Transfer of property: Here property means ownership. A transfer of property
in goods from seller to the buyer must take place. Property (ownership) is of
two types :
a). General property.
b) Special property.
5. Contract: It is a contract between a buyer & the seller

Meaning of Agreement to sale


According to section 4 (3) of the Sale of
Goods Act,1930,
where under a contract of sale, the transfer
of the property in the goods is to take
place at a future time or subject to some
condition thereafter to be fulfilled, the
contact is called an agreement to sale

Difference between sale & Agreement to sale


Basis

Sale

Agreement to Sale

Transfer of property

The property of goods is


transferred from seller to
buyer immediately

In an agreement to
sale , the property of
goods is not transferred
immediately

Risk follows ownership

Risk follows ownership.


The property in goods
passes to the buyer
along therewith the risk

Since the property is not


passes to the buyer , the
risk also not passes to
them

Nature of the contract

It is an executed contract It is an executory


contract

Contract sue for price

The seller can sue the


buyer for the price of the
goods becz of the
passage of the property
to the buyer

Subsequent loss

The loss or destruction is Such loss or destruction


the liability of the buyer
is the liability of the seller

The aggrieved party can


sue for the damages only
not for the price

Subject matter of the contract of sale: Goods


The subject matter of contract of sale of goods is always the
goods.

Meaning
Sec 2(7) goods means every kind of moveable
property other than actionable claims & money &
includes stocks , shares, growing crops , grass &
things attached to or forming part of land which are
agreed to be revered before sale or under the contract
of sale

Kinds of goods

Existing goods

Contingent goods
future goods

1. Existing goods: Existing goods are those goods which are owned &
possessed by the seller at the time of sale. only existing goods can be sold.
It is divided further as :
a) Specific goods
B) Ascertained goods
C) Unascertained goods
2. Future goods : it means goods to be manufactured or produced or
acquired by the seller after making the contact of sale. In other words these
are those goods which are not existing at the time of contract of sale.
3. Contingent goods: These are those goods the acquisition of which by
seller depend upon contingency which may or may not happen.

Conditions & Warranties


It is usual for a seller to make certain
representation & statements in praise of his
goods while selling goods to the buyer. For ex:
dehra duni basmati rice etc. some of the
statement made by the seller is an assertion of
facts, it is considered as a stipulation which
form part of the contract of sale..this
stipulation in a contract of sale with reference
to goods may be Conditions & warranties.

Conditions
A Condition is a stipulation which is essential to the
main purpose of the contract , the breach of which
gives right to put an exist to the contract and to claim
damages. Sec 12 (2)
Example: b asked a car dealer to suggest him a suitable
car for touring purpose. The dealer suggested to buy a
Buggatti car B accordingly purchased the car but
found it unfit for the purpose. Hence the car was not
suitable for the purpose , so B could return the car &
get back the price

Warranties
A Warranties is a stipulation collateral to the main purpose of
the contract, the breach of which gives rise to a claim for
damages but not a right to reject the goods and treat the
contract as repudiated. Sec 12(3)
A Warranty is not regarded as the very basis of a contract or
its foundation. Hence a breach of warranty does not give the
aggrieved party, a right to reject the goods and repudiate the
contract. The party will have to accept the goods but can
claim the damages for the breach of warranty.

Difference b/w Condition & Warranty


Basis

Condition

Warranties

As to Purpose

A condition is essential to A Warranty is only


the main purpose of the
collateral, to the main
contract.
purpose of the contract.

As to treatment

A breach of condition
may be treated as a
breach of warranty

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

The aggrieved party can


repudiate the contract or
claim damages or both in
case of breach of
condition

A breach of warranty
give a right to claim
damages & a right to
repudiate the contract

As to Breach

Express & Implied Condition & Warranties


Express Conditions:
Conditions &Warranties are express when the
term of the contract expressly state them e.g
cash to be paid on delivery of goods i.e, pay
cash & take delivery of the goods immediately.
Thus express conditions are those , which are
agreed upon b/w the parties at the time of
contract & are expressly provide in the contract

Implied Conditions
Implied conditions & warranties are those which
are presumed by the law to be present in the
contract. In other words they, are Implied
when not being expressly provided for.
It should be noted that an implied conditions
may be negated by an express agreement

Conditions of Implied Conditions

Implied Warranties

Doctrine of Caveat Emptor


In case of sale of goods, the Doctrine of Caveat
Emptor means let the buyer beware.
When sellers display their goods in the open market,
it is for the buyer to make a proper selection or choice
of the goods.
if the goods turn out to be defective , he cannot hold
the seller liable. the seller is in no way responsible for
the bad selection of the buyer.
the seller is not bound to disclose the defect in the
goods which he is selling.

It is the duty of the buyer to satisfy himself before


buying the goods that the goods serve the purpose for
which they are being bought.

Exceptions:
the important exceptions to this rule are as follows:

1. Implied conditions as to quality & fitness :


where the buyer makes known to the seller the particular
purpose for which the goods are required so as to show that
he relies on the sellers skill or judgment and the goods are of
description which is in the course of sellers business to
supply, it is the duty of the seller to supply such goods as are
reasonably but for the purpose.

2. Sale of goods by description:


where the goods are bought by description from a seller who
deals in good of that description , there is an implied
condition that the goods shall be of good quality. this rule
does not apple here.but if the buyer examine itself the goods
the rule then gets applied.

3. Usage or custom of trade:


An implied warranty or condition may be annexed by the
usage of trade & if the seller deviates from that this rule of
caveat emptor is not applicable
4. Consent by Fraud: Where the seller sells the goods by
making some misrepresentation or fraud & the buyer relies on
it or when the seller actively conceals some defect in the
goods so that the same could not be discovered by the buyer
on a reasonable examination, than the rule of caveat emptor
will not apply. In such case the buyer has the right to avoid the
contract n claim for damages