Sale of Goods Act 1930

Definition of Contract of Sale

Section 4(1) of the sale of goods act defines: A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. In other words, a contract to transfer the ownership of goods from the seller to the buyer is known as contract of sale.

Essentials of a contract of sale

The following are essentials of a contract of sale of goods: 1. Contract 2. Two parties 3. Transfer of property 4. Goods 5. Price 6. Sale and agreement to sell 7. Other formalities

Difference between sale and agreement to sell

Sale 1. Transfer of property 2. Type of goods 3. Nature of rights 4. Risk of loss 5. Consequences of breach 6. Right of resale 7. Insolvency of the buyer 8. Insolvency of seller 9. Nature of contract Agreement to sell

Kinds of goods
Existing Goods
Ascertained goods Unascertained goods

Future Goods Contingent Goods

Transfer of property
The phrase transfer of property in goods means transfer of ownership of the goods. The rules regarding transfer of property in goods are as under: 1. Unascertained goods 2. Intention of parties 3. Specific goods in deliverable state 4. Goods to be put into deliverable state 5. Goods to be measured, counted, tested etc. 6. Unconditional appropriation 7. Delivery to the carrier 8. Goods delivered on approval

Rules of delivery of goods or Performance of Contract

The parties should include the terms in their contract regarding time, place, delivery of goods, acceptance of delivery and payment of price, etc. if the contract is silent the rules contained in the sale of goods act apply. (Sec 31) Delivery of goods. Delivery means a voluntary transfer of possession from one person to another

Mode of Delivery o Actual delivery When the goods are physically handed over by the seller or his agent to the buyer or his agent o Symbolic delivery When the goods are in bulk, in such case the control over the goods is transferred o Constructive delivery When there is a change in the possession of goods without any change in the actual custody of the goods

Rules of delivery of goods

Duties of seller and buyer Delivery and payment Mode of delivery Effect of part delivery Demand of delivery Place of delivery Time of delivery Possession by third party Expenses of putting the goods into deliverable state Wrong delivery Installment deliveries Delivery to carrier Examining the goods Acceptance of delivery Rejection of goods Refusal to take delivery

Doctrine of Caveat Emptor

Caveat Emptor
Caveat emptor means let the buyer beware. According to the principle, it is the duty of the buyer to be careful while purchasing goods of his requirement. The buyer should examine the goods thoroughly. He should ensure that the goods are suitable for his purpose. If the goods prove to be defective or do not suit his purpose, the buyer cannot hold the seller liable. If the buyer at the time of purchase depends upon his own skill and makes a bad choice, he must blame himself for this mistake.

Caveat Emptor (Cont.)

According to Sections 16 (a), the seller is under an obligation to inform the buyer of any defect in the goods sold at the time of contract except in a case where the defect is obviously known to the buyer. It means that if the defects are in the knowledge of seller, he must inform to the buyer about those defects provided those defects are not obvious. But if the defects are obvious, the seller is not bound to inform to the buyer.

Exceptions to the doctrine

1-Purchase by description When the goods are purchased by description, the doctrine of caveat emptor does not apply if the goods do not correspond with the description. Example: Mr. A is selling computer to Mr. B, describing that it is pentium IV, but subsequently found that it is pentium III. Mr. B could return it as it does not correpond with description.

Exceptions to the doctrine

2-Purchase by samples and description When the goods are purchased by sample as well as by description and the bulk of the goods do not correspond both with the sample of with the description, the buyer is entitled to reject the goods. Example: C sells an air filter to B saying that is genuine and fit for a Corolla car. B finds that it is fit for Corolla car but not genuine. B can reject it.

Exceptions to the doctrine

3-Fitness for purpose The doctrine of Caveat emptor does not apply when the buyer informs the seller about particular purpose for which he needs the goods and relies upon the sellers skill and judgment. The seller must supply the goods which shall be fit for the buyers purpose. Example: C tells B, a car dealer, that he needs a car for touring purpose. B sells a car which is not made for touring purpose. C can reject the car.

Exceptions to the doctrine

4-Merchantable Quality When the goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality. But if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed. Example: A bought milk from B, a dairyman. It was contaminated by germs. As wife got infected and died after drinking the milk. B was held liable for damages.

Exceptions to the doctrine

5- Usage of trade When the trade usage attaches an implied condition or warranty as to the quality of fitness and the seller deviates from that condition or warranty, the principle of caveat emptor does not apply. Example: A purchase a hot water bottle from B, a retail chemist. When he opened, it burst and injured him. The proper use of bottle was known to B. B was liable for damages.

Exceptions to the doctrine

6- Purchase by sample When the goods are bought by sample, the principle of caveat emptor does not apply if the bulk does not correspond with the sample or if the buyer is not provided an opportunity to compare the goods with the sample. Example: X buys oil filter from Y by showing a sample. The oil filter does not correspond with a sample. X can return it.

Exceptions to the doctrine

7- Consent by fraud and misrepresentation When the seller intentionally makes a wrong statement to the buyer and the buyer relies on it or when the seller actively conceals the defects in the goods which could not be discovered on reasonable examination, the principle of caveat emptor does not apply. Example: A knows that his watch is made in Pakistan. In order to sell his watch, A tells B that it is made in Switzerland. B buys the watch. B can reject the contract.

Unpaid Seller

Who is an Unpaid Seller?

The seller of goods is deemed to be an unpaid seller in the following circumstances: When the whole of the price has not paid or tendered. When a bill of exchange or other negotiable instrument has been received as a conditional payment and it has been dishonoured.

Features of unpaid seller

He must sell goods on cash basis and must be unpaid. If he sells the goods on credit, he is not an unpaid seller during the period of credit. If the term of credit has expired and the price has not been paid. He must be unpaid wholly or partly. Where the price is paid in the form of negotiable instrument and it is dishonoured. If the price is offered by the buyer and the seller refuses to accept it, the seller cannot be called unpaid seller.

Right of Lien
Right to lien means the right to retain the possession of goods until the full price is received. An unpaid seller can exercise his right of lien in the following cases: Where the goods were sold for cash and not on credit. Where the goods were sold on credit but the term of credit has expired. Where the buyer becomes insolvent, even the period of credit has not been expired.