THE SALE OF GOODS ACT, 1930

Introduction
The sale of goods acts, 1930, applies to movable
goods, and not to immovable goods, which are
governed by Transfer of property act, 1882.

Goods?
It includes:(a) Existing goods:- Specific and generic

goods.
(b) Future goods,
Shares and Stocks,
(d) Goodwill, Patent, Copy Right, Trade
Mark etc.

Definition: The Sale Of Goods Act, 1930, Section 4,

defines Sale & Agreement to Sale.

What is SALE?
(1) A contract of sale of goods
is a contract whereby the seller transfers or
agrees to transfer the property in goods to the
buyer for a price. There may be a contract of
sale between one part-owner and another
(2) A contract for sale may be absolute or
conditional.
(3) Where under a contract of sale, when the
property in goods is transferred from the seller
to the buyer, the contract is called a Sale.
What is agreement to sale:- An agreement of sale
constitutes the terms and conditions of sale of a
property by the seller to the buyer. These terms and
conditions include the amount at which it is to be sold
and the future date of full payment

FORMATION OF CONTRACT OF SALE

Essentials
Contract of
of sale)
Sale
(Essential of
Ingredients
(a)Seller/
buyer

(b) Transferable
Goods

(d) Consideration
Or Price

(e) All essential

Elements of
a valid contract
(Act, 1872)

1. Bilateral contract. A person cannot buy his own goods, as such,

there must be two parties, the buyer and the seller. Both should
be competent to contract & between them there must a bilateral
contract. A sale is made by an offer to buy or sell goods for a
Consideration (Price), and the acceptance of such offer. It may
provide for the immediate delivery of the goods or immediate
payment of the price or both, or for the delivery or payment by
installments or that the delivery or payment or both shall be
postponed. It may be made in writing or by word of mouth or
partly in writing and partly by word of mouth, or may be
implied from the conduct of the parties [Sec. 5].

2. Goods.
Goods form the subject of a contract of
sale.
They mean every kind of movable
property other than actionable claims and
money, and include 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 [Sec. 2(7)].
3. Price (Consideration). The consideration for
sale of goods must be money. It is called the
price, rate etc. paying money by way of
cheque, credit card, DD, Pay Order, etc are
treated as money, but not barter trade.
Cont..d

Goods may be:

1.Existing goods, i.e. goods which are owned
and
possessed by the seller at the time of
sale. These
goods may be specific
ascertained or unascertained.
2.Future goods, i.e., goods which the seller
does not possess at the time of the contract
and which will be acquired, manufactured or
produced by him at some future date.
3.Contingent goods, i.e. goods, the acquisition
of which by the seller depends upon a
contingency which may or may not happen.
Example: A agrees to sell to B 25 bales of
Egyptian cotton, provided the ship which is
bringing them reaches the port safely. It is a
contract for the sale of contingent goods. If
the ship is sunk, the contract becomes void

CONDITIONS AND WARRANTIES

CONDITION:(Section. 12(2), 1930), defines that:A Condition in a contract for sale of goods is a
vital stipulation, the breach of which may result the
contract being repudiated by the injured party.
Condition
is most essential to the object/main
purpose of a Contract & it is the fundamental of a
contract.
A breach of condition may be treated as breach of
warranty.
WARRANTY (Section. 12(3), 1930), defines that:A warranty is incidental or collateral to the main
purpose but not a vital stipulation. The breach of
which gives rise to a claim for damage, but not a
right to reject the goods and treat the contract a
repudiated.
A breach of warranty cannot be treated as breach of
condition.

CONDITIONS AND
WARRANTIES
Express and Implied conditions
warranties
In

and

a contract of sale, conditions and

warranties may be express or implied.
1.Express conditions and warranties are those
which are agreed upon between the parties
at the time of the contract, and which are
expressly provided in the Contract.
2.Implied conditions and warranties are those
which are implied by law unless the parties
stipulate to the contrary.

Implied Conditions.
1.Condition as to title. In a contract of sale
there is an implied condition on the part of the
seller that:(a)In the case of a sale, he has a right to sell the
goods, and
(b)In the case of an agreement to sell, he will
have a right to sell the goods at the time when
the property is to pass [Sec. 14(1)]. (Rowland
Vs Rivall)?
2. Condition as to Description. In a contract of
sale by description, there is an implied
condition that the goods shall correspond with
the description. (MLoor Vs. Tricle)?
The term ' sale by description' includes the
following situation:-

(b). Where the buyer has seen the goods but he relies not on
what he has seen but what was stated to him and the
deviation of the goods from the description is not apparent.
. Packing of goods may sometimes be a part of the description.
Where the goods do not conform to be method of packing
described (by the buyer or the seller) in the contract, the
buyer can reject the goods.
3.CONDITION AS TO QUALITY OR FITNESS. (Sec-16).
Where the buyer, expressly or by implication, makes known
the seller the particular purpose for which goods are
required, so as to show that the buyer relies on the seller's
skill or judgment and the goods are of a description which it
is in the course of the seller's business to supply (whether or
not as the manufacturer of producer), there is an implied
condition that the goods shall be reasonably fit for such
purpose. In other words, this 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,

In other words, this condition of fitness shall

apply, if:
(a). The buyer makes known to the seller the
particular purpose for which the goods are
required,
(b). The buyer relies on the seller's skill
orjudgment,
. The goods are of a description which the
sellers ordinarily supplies in the course of
his business, and
(d). The goods supplied are not reasonably fit
for the buyer's purpose.
4. CONDITION AS TO MERCHANTABILITY.
Where goods are bought by description
from a seller who deals in goods of that
description (whether he is the manufacturer
or producer or not), there is an implied
condition that the goods shall be of

5. CONDITION IMPLIED BY CUSTOM or TRADE USAGE.

An implied condition as to quality or fitness for a particular
purpose may be annexed by the usage of trade. For instance, if a
person buys a perambulator or a medicine the purpose for
which it is purchased is implied from the thing itself; the buyer
need not disclose the purpose to the seller. [Sec. 16(3)].
6. CONDITION AS TO SALE BY SAMPLE. In the case of a
contract for sale by sample there is an implied condition:- (a)
That the bulk shall correspond with the sample in quality; (b)
That the buyer shall have a reasonable opportunity of
comparing the bulk with the sample; and That the goods shall
be free from any defect, rendering them un-merchantable,
which would not be apparent on a reasonable examination of the
sample.
7. CONDITION AS TO WHOLESOMENESS. In case of eatables
and provisions, there is an implied condition that the goods shall
be wholesome and fit for human consumption.

IMPLIED WARRANTIES
A condition becomes a warranty when -a)thebuyer waives the conditions or opts to
treat the breach of the condition as a
breach of warranty ; or
b) The buyer accepts the goods or a part
thereof, or is not in a position to reject
the goods.
1. Implied Warranty of Quiet Possession
In every contract of sale, unless there is a
contrary intention, there is implied
warranties that the buyer's 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 as
consequences of the seller's defective
title, the buyer may sue the seller for
damages for breach of this warranty.

2. Implied Warranty of Freedom from

Encumbrances -- The buyer is entitled to a

further warranty that the goods shall be free

from any charge or encumbrance infavorof
any third party not declared 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.

3.Implied warranty of dangerous goods.

A warranty substantiating that the goods are
not dangerous in nature. Unless mentioned in
contrary, the goods are presumed to be safe
by implied warranty.

Rules regarding Transfer of Property in

Goods(Sec-18-25)
The primary rules for ascertaining when the
property in goods passes to the buyer are as
follows:
[1] Where there is a contract for the sale of

unascertained goods, no property in the

goods is transferred to the buyer unless and
until the goods are ascertained [Sec. 18].
[2] Where there is a contract for the sale of
specific or ascertained goods, the property
in them is transferred to the buyer at such
time as the parties to the contract intend it
to be transferred.
For the purpose of
ascertaining the intention of the parties, the
terms of the contract, the conduct of the
Cont..d

Time at which the ownership of the goods is transferred (Sec 19(1).

It can be done as per the mutual consent of parties. Where the
intention of the parties cannot be ascertained, the following
rules shall apply:

1. Passing of ownership of Specific goods (Sec-19).

(a) When goods are in a deliverable state (Sec-20). When the goods
are specific, weighed, counted and in a deliverable state, and if
the contract is unconditional, property passes as soon as the
contract is entered into [Sec. 20].
(b) When goods are not in a deliverable state (Sec-21). If the seller
has to do something to put them in a deliverable state, property
passes only when such thing is done and notice thereof is given
to the buyer.
(c) When goods are to be measured or weighed (Sec-22).Goods in a
deliverable state, but the seller has to do something for the
purpose of ascertaining the price, like weighing, counting etc,.

The property will pass only when such act is done and
notice thereof is given to the buyer.
(d) When goods are delivered On Sale or Return or
Approval basis (Sec-24): In this case, the change of
ownership happens when:-(a) The buyer accepts the
goods, or (b) The buyers particular act amounts to
acceptance, or The buyer fails to notify the refusal
even after the stipulated period.
2.
Passing
of
ownership
of
Unascertained Goods or Future Goods
(Sec-23).
In case of unascertained or future goods sold by description,
property passes only when goods according to the
description are unconditionally appropriated to the contract,
and the buyer is given a notice thereof.

3. Passing of ownership in case

Reservation of right of Disposal
or Jus Disponendi
When goods are delivered to a carrier the ownership of
the goods are not transferred to the buyer unless the
buyer performs his legal obligation to the contract.
Example:
A, the Seller, sends certain goods from Delhi to B, the
Buyer, in Bombay by carrier with a condition that B
should pay to A, for the goods, before taking delivery.
If B fails, A has the right to sell those goods to third party.

PERFORMANCE OF SALE
CONTRACT
It is the duty of the seller to deliver the goods
and of the buyer to accept and pay for them in
accordance with the terms of the contract of
sale.
Delivery of goods.
Delivery
means
voluntary
transfer
of
possession of goods from the seller to the
buyer. It may be
(i) Physical or Actual Delivery,
(ii)

Symbolic delivery, or

(iii) Constructive Delivery or attornment.

Cont..d

Rules regarding
goods.

delivery

of

1. Unless otherwise agreed, delivery of the goods and

payment of the price are concurrent conditions.
2. A delivery of part of the goods, in progress of the
delivery of whole, amounts to, for the purpose of
passing the property in such goods, as a delivery of
the whole.
3. Apart from any express contract, the seller of goods is
not bound to deliver them until the buyer applies for
delivery.
4. The place of delivery is the place at which they are at
the
time of the sale.
5. If the goods are in possession of a third party, there is
no delivery until such third party acknowledges to the
buyer
that he holds the goods on his behalf.
6. Where the seller is bound to send
the goods to the
Cont..d

7.Expenses of making delivery are borne by

the seller and expenses of obtaining
delivery by the buyer.
8.If the seller sends to the buyer a larger or a
smaller quantity of goods than he ordered,
the buyer may
a) Reject the whole, or
b) Accept the whole, or
c) Accept the quantity he ordered and
reject the rest.
9.If the seller delivers, with the goods
ordered, goods of a wrong description, the
buyer may accept the goods ordered and
reject the rest or reject the whole.

UNPAID SELLER
As per section. 45, 1930, a seller of goods is
deemed to be an UNPAID SELLER:-

(a)When the whole price has not been

paid;
(b)When the whole price has not been
tendered;
(c)When the negotiable instrument or
bill of exchange has been received
as a conditional payment; and the
condition on which it was received
has not been fully met by reason of
the dishonor of the instrument or

WHAT ARE THE RIGHTS OF AN UNPAID

SELLER?

(I) UNPAID SELLERS RIGHTS

AGAINST GOODS.(Sec.46)
a. A lien on the goods for the price, while he is
in possession of them.
b. in case of insolvency of the buyer, a right of
stopping the goods in transit when parted
with the possession of them
c. He can exercise a right of re-sale as limited
by this act.
d. He can exercise a right of withholding
delivery, if he possess the goods.

(II) UNPAID SELLERS RIGHT OF LIEN

a) Unpaid Sellers Lien:-Sec. 47, 1930, provides that
the unpaid seller of Goods who is in possession
of them is entitled to retain possession of them
until payment or tender of price in the following
cases:1. Where the goods have been sold without any
stipulation as to credit.
2. Where the goods have been sold on credit,
but term of credit has expired.
3. Where the buyer becomes insolvent.
b) Part Delivery Sec.48, 1930, provides that where
an unpaid seller has made delivery of goods, he
may exercise his right of lien on the remainder,
unless such part delivery has been made under
such circumstances as to show an agreement to
waive the lien.

c) TERMINATION OF LIEN
As per section.49, 1930, provides that the unpaid
seller looses his lien in the following situations:(a) when he delivers the good 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,
by waiver thereof.

(III) UNPAID SELLERS RIGHT OF STOPPAGE IN

TRANSIT: when the buyer of goods becomes
insolvent, the unpaid seller who has parted with the
possession of the goods has the right of stopping
them in transit. The seller may resume possession of
the goods, as long as they are in the course of
transit and may retain them until payment or tender
of the price [Sec. 50].

The unpaid seller may exercise this right of

stoppage in transit either by taking actual
possession of the goods, or by giving notice
of his claim to the carrier or other bailee in
whose possession the goods are.
CONDITIONS: The buyer of goods must be insolvent.
The seller should be unpaid.
The goods must be in transit.
The seller may resume possession of goods
as long as they are in the course of transit.
The seller may retain the goods
payment or tender of the price
Cont..d

until

(IV). RIGHT OF RE-SALE.

The unpaid seller can re-sell the goods
(i) Where the goods are of a perishable
nature;
(ii)Where he has exercised his right of lien
or stoppage in transit and given notice
to the buyer of his intention to re-sell
the goods and where the buyer has not
within a reasonable time paid the price;
and
(iii)Where the seller expressly reserves a
right of re-sale in case the buyer should
make default [Sec. 54].

(V)
RIGHT
DELIVERY.

OF

WITHHOLDING

Where the property in goods has not passed

to the buyer, the unpaid seller has, in
addition to his other remedies, a right of
withholding delivery similar
to and coextensive with his rights to lien and
stoppage in transit where the property has
passed to the buyer [Sec. 46 (2)].

(VI). AUCTION SALE

A sale by auction is a public sale where
different intending buyers try to outbid each
other. The goods are ultimately sold to the
highest bidder. The law on auction sales is

(VII) UNPAID SELLERS RIGHT

AGAINST BUYER
If the goods are delivered to the buyer, the
unpaid seller has following rights:(a) Right to Sue for price. Where under a
contract of sale the property in the goods has
passed to the buyer and the buyer wrongfully
neglects or refuses to pay for the goods
according to the terms of the contract, the seller
may sue him for the price of the goods [Sec. 55].

(b) Right to Sue for Damages for nonacceptance.

Where the
buyer wrongfully
neglects or refuses to pay for the goods, the
seller may sue him for damages for nonacceptance [Sec. 56].

c. Right to Repudiation of contract

before due date.
Where the buyer in a contract of sale
repudiates the contract before the date
of delivery, the seller may either treat the
contract as subsisting and wait till the
date of delivery, or he may treat the
contract as rescinded and sue for
damages for the breach [Sec. 60].

d. Right to Sue for special damage &

interest. The seller can recover interest
on price from the date on which the
payment became due, if there is a special
agreement to that effect