MODULE:4 SALE OF

GOODS ACT,1930
 DEFINITIONS

• Buyer- A person who buys or agrees to buy a product.

• Seller – A person who sells or agrees to sell a product.
• Delivery-Voluntary transfer of the possession of goods from one person to another. Immediate delivery of goods is not mandatory.
• Price- the money consideration for the sale of goods.
• Goods- Every kind of movable property other than actionable claims and money and includes stock and shares, growing crops, grass and
things attached to or forming a part of the land, which are agareed to be served before the sale or under the sale of contract.
• Agreement to sale- where the transfer of property in goods takes place at a future date.
• Sale- where the transfer of property in goods takes place at the time of conduct.
• Property- the general property of goods.
1. General Property- ownership
2. Special Property- Possession or control
 DOCUMENT OF TITLE

1. Bill of Lading
2. The dock Warrant
3. The warehouse keeper’s certificate
4. The wharfinger’s certificate
5. The railway receipt
6. The transport document
7. The order for the delivery of goods
 FORMATION OF THE CONTRACT
1. Two parties
2. Goods
3. Transfer of property
4. Consideration (Price)
5. Elements of Contract
6. Form of contract of sale
7. Delivery of Goods
DIFFERENCE BETWEEN SALE AND AGREEMENT
TO SALE / BETWEEN SALE AND HIRE
PURCHASE
• From PDF.
 DIFFERENCE BETWEEN SALE AND
BAILMENT
Matter Sale Bailment
Meaning It is the transfer of property in Transfer of special property for
goods for price. some specific purpose.
Consideration Always with consideration. Can be without consideration.
Returning of Goods The goods are not return by the The goods are returned by the
buyer. bailee after the purpose is over.
 CONTRACT FOR WORK AND SKILL

• Features:
1. Contract is to exercise skill and work.
2. Supply of own goods is only subsidiary or supportive.
3. Intention of the parties is to transfer goods only after the exercise of some skill and labour.
 TYPES OF GOODS
• The goods may be classified into following categories

A. Existing goods Existing goods are the goods, which are owned and possessed by the seller at the time of
sale.
Existing goods may be of three types;
(a) Specific Goods: The goods, which are identified and agreed upon by the parties at the time of contract
of sale. It should be noted that the goods must be both identified and agreed upon.
(b) Unascertained Goods: These are the goods, are not identified and agreed upon at the time of the contract
of sale. These goods are merely described by the parties at the time of contract of sale.
(c) Ascertained Goods: There are the goods, which are identified after the formation of contract of sale.
When the un-ascertained goods are identified and agreed upon by the parties, the goods are known as
ascertained goods
B. Future Goods Future goods are those goods, which do not exist at the time of the contract of sale. These
goods are to be manufactured or acquired by the seller after the making of the contract of sale.
C. Contingent goods It is a kind of future goods. It is goods, the acquisition of which is contingent upon the
 PRICE OF GOODS

• Methods:
1. Specified under the contract.
2. As per the method specified in the contract decided in advance.
3. In accordance to custom and usage of trade.
4. Determined by third party. Contract shall specify the name of third party n contract.
 CONSEQUENCES OF DESTRUCTION OF
SPECIFIC GOODS
• If goods perish before making a contract
• Where a part of the goods perish before making of contract
• If goods perish after the agreement to sale but before sale.
 CONDITIONS AND WARRANTIES

 Condition: A condition is a stipulation essential to the main

purpose of the contract, breach of which gives right to treat the
contract as repudiated or broken.

 Warranty: A Warranty is a stipulation collateral to the main

purpose of the contract the breach of which gives rise to a
claim for damages but not to a right to reject the foods and
treat the contract as repudiated or broken.
• Generally, at the time of sale, the seller makes some representation, statements of stipulations for the praise of his goods. Some
of representations are in nature of opinion others are in nature of facts.
• Representation as to fact which becomes a part of contract of sale is called as stipulation.
• Stipulation may be condition or warranty depends upon its importance in relation to contract. Stipulation which is essential to
the main purpose of contract is known as condition.
• Breach of condition gives the aggrieved party right to terminate the contract.
• Stipulation which is collateral to the main purpose of the contract is warranty.
• Breach of warranty gives rise to the aggrieved party right to claim damages but contract cannot be terminated.
• The conditions and warranties may be express or implied.
• Express conditions and warranties are those, which the parties agree expressly, i.e. orally or in writing. Implied conditions are
those, which are implied by the law in the absence of any agreement to the contrary
 DIFFERENCE BETWEEN
CONDITION & WARRANTY
Condition Warranty
 Essential Subsidiary

 Affects the legality of

 It does not affect
contract
 May be treated as
Warranty cannot
breach of warranty become a condition
 Contract can be
cancelled  At best damages are
to be paid
• IMPLIED CONDITIONS

The following are the implied conditions which are contained in the Sales of Goods Act:
1. Conditions as to title – sec 14(a)
⇒ There is an implied condition on the part of the seller that
• In the case of sale, the seller has a right to sell the goods, and
• In the agreement to sell, the seller will have a right to sell the goods at the time of passing of ownership in
goods.
⇒ If the title of seller out to be defective, the buyer must return the goods to the true owner and recover the
price from the seller.
2 Conditions as to description – Sec 15
⇒ Where the goods are sold by description, there is an implied condition that the goods shall correspond to
the description.
Example; A machine was sold. The buyer has not been the machine, but the seller described it as a new one.
However, it was found to be a very old one. Held, the machine was not according to the description.
3. Sale by sample – Sec 17
⇒ Where the goods are sold by sample, the following are implied conditions.
• The bulk shall correspond to sample in quality.
• The buyer shall be given a reasonable opportunity to compare the goods with the sample.
• The goods shall be free from any defect, rendering them un – merchantable. It is to be noted that this
implied condition applies only in the case of latent defects, i.e. those defects which cannot be
discovered by ordinary inspection. In fact, such defects are discovered when the goods are put to use
or by examination in laboratories. The seller is not liable for apparent or visible defects which can be
discovered by examination
4. Sale by description as well as sample – Sec 15
• ⇒If the sale is by sample as well as description, both conditions shall be satisfied. Goods must correspond with
sample as well as description.
5. Conditions as to quality and fitness for buyer’s purpose –Sec 16
⇒Where the buyer, expressly or impliedly, tells the seller the particular purpose for which he needs the goods and relies
on the skill or judgment of the seller, there is an implied condition that the goods shall be reasonably fit for such purpose.
⇒When the article can be used only for one particular purpose, the buyer need not inform the seller the purpose for
which the goods are required.
The condition as to quality or fitness’ well not apply, if the buyer is suffering from an abnormality, which renders the
goods unsuitable for a particular purpose and the buyer does not inform the seller about that abnormally.
6.Conditions as to merchantability
⇒Where goods are bought by description from a seller, who deals in goods of that description, there
is an implied conditions that the goods shall be of merchantable quality
⇒ ‘Merchantability’ means that there is no defect in the goods, which renders them unfit for sale.
Thus, a watch that will not keep time and a pen that will not write cannot be regarded as
merchantable.
7. Condition as to wholesomeness
⇒ In the case of eatable and food – stuff, there is an implied condition that the goods shall be
wholesomeness, i.e., free from any defect which renders them unfit for human consumption.
 IMPLIED WARRANTIES

1. Warranty as to quiet possession – Sec 14

⇒ In the absence to any contract showing contrary intention, there is an implied warranty that the buyer shall have
and enjoy quiet possession of the goods. If the buyer is disturbed in the enjoyment of the goods, he can claim
damages from the seller.
2 Warranty against encumbrances – Sec 14
⇒Unless the circumstances of the case are such as to show a contrary intension, there is an implied warranty that the
goods shall be free from any charge or encumbrance in favour of any party not declared to the buyer before or at the
time contract is made. However, there will not be any such warranty if charge is declared to buyer at the time of sale.
3 Warranty as to quality and fitness by usage of Trade – Sec 16
An implied warranty as to quality or fitness for a particular purpose may be annexed by the usage of trade.
4. Warranty to disclose the dangerous nature of goods
In case of sale of dangerous goods, the seller is under an obligations to warn the buyer about the
probable danger. Failure to do so will make the seller liable to pay damages.
5. Circumstances when a condition can be treated as warranty
 If the buyer wives the condition
 If the buyer elects to treat the breach of condition as a breach of warranty
 If the condition becomes impossible or if the performance of the condition is otherwise excused.
• CAVEAT EMPTOR or DOCTRINE OF CAVEAT EMPTOR
• The doctrine of ‘Caveat Emptor’ means “let the buyer beware”.
• ⇒ It means that the buyer while purchasing goods must act with a “third eye and ear”, i.e.,
• He should be careful to see that the goods purchased will serve his purpose well.
• If the buyer is not careful and he finds later on that the goods do not serve his purpose, he cannot
hold the seller liable for it.
• The seller is under no obligation to tell the defects of his articles.
 EXCEPTION TO CAVEAT EMPTOR

• Where the implied condition as to quality or fitness for the buyer’s purpose is applicable.
• When the goods are sold by description, it should be of merchantable quality.
• In case of edible items, wholesomeness is applicable.
• Custom may provide that a particular defect will amount to unfitness and the buyer can reject the
goods.
• When the consent of the buyer is obtained by fraud.
 TRANSFER OF OWNERSHIP OF SPECIFIC
•
GOODS
Ownership is transferred at the time of making contract
1. Contract is for specific goods
2. Goods are in deliverable state
3. The goods are not required to be weigh or measured for determining price.
• Ownership is transferred when goods are put in deliverable state
 Contract is for specific goods.
 Goods are put in deliverable state by the seller.
 The above information must be known by the buyer.
• Ownership is transferred when goods in deliverable state put to weighed or measured to ascertained price
 Contract is for specific goods.
 Price is not determined at the time of formation.
 Goods re put in deliverable state by seller.
 Above information must be known by the buyer.
 TRANSFER OF OWNERSHIP IN CASE OF
UNASCERTAINED GOODS
• Ascertainment should be done first
• Ascertainment need to be done by seller
• The contract to sell unascertained goods is not complete sale. It is agreement to sell.
 TRANSFER OF OWNERSHIP IN CASE OF GOODS
SALE ON APPROVAL OR ON RETURN BASIS

• Property does not pass from seller to buyer as buyer has option to return the goods after
sometime on prior approval.
Passing of Risk
 RULES REGARDING DELIVERY OF GOODS

• Payment of Price
• Buyer’s duty to demand goods

Types or Mode of Delivery:

1. Actual Delivery
2. Symbolic Delivery
Constructive Delivery

Place of Delivery
Time of Delivery
Expenses
• Delivery of wrong quantity
• Delivery of mixed quality-quantity
• Delivery by installment
• Right to examine
• Delivery to carrier or wharfinger
• Seller duty on valid delivery of goods
• Acceptance of delivery
• Wrongful refusal to take delivery
• Goods sent by sea route
 UNPAID SELLER

• A seller is deemed to be unpaid in the following cases:

1. The price must be due but not paid.
2. Negotiable instrument is dishonored.
3. The seller who has been paid a degree of the price.
4. Small portion of total amount remains unpaid.
5. Price is paid but some another related expenses are not paid.
6. The seller must have an immediate right of action for the price.
 RIGHTS OF AN UNPAID SELLER

1. Rights of an unpaid seller against the goods when ownership is transferred

• Right of Lien
• Right of stoppage in transit
• Right of resale of goods
2. Rights of an unpaid seller against the goods when ownership is not transferred
• To withhold delivery
• Right of Unpaid Seller against Buyer
1. May sue for the price
2. May sue for damages for non-acceptance of goods
3. May sue for the damages and the repudiation of the contract before the due date of delivery of
goods
4. Has the right of interest for the delayed payment
5. May sue the damages for the wrongful refusal to take the delivery
 RIGHT OF LIEN

• Right to retain the possession of goods until the full price is received.
• Seller can have right to lien if,
1. He must have possession of goods.
2. He is an unpaid seller.
The unpaid seller’s lien is lost when,
3. Wives his right of lien.
4. Buyer disposes of the goods with consent of seller.
5. The goods are delivered to buyer or his agent.
6. The price is paid by the buyer.
7. Where the right of lien is expressly excluded.
8. The goods are destroyed.
• Right of stoppage in transit (Extension of Right to Lien)

1. Duration of transit
A carrier may hold the goods in there capacities:
As seller’s agent
As buyer’s agent
In an Independent Capacity- seller can exercise the right to stoppage in transit by ,
 Taking actual possession of goods
 By giving a notice to carrier who holds the goods.
 By a notice of hs claim to the bailee who is in possession of goods.
 RIGHT OF RESALE

Rights In case of Resale after Notice In case of resale without Notice

The unpaid seller’s right to recover Yes, loss can be recovered. No
the loss on sale.
The original buyer’s right to No Yes
recover the profit on goods.
New buyer’s right to acquire good Acquire title Acquire title
title.
RIGHT TO WITHHOLD DELIVERY OF GOODS

• If the seller is unpaid seller

• The ownership of goods has not been passed.
 DELIVERY TO CARRIER

• A transporter or a bailee
• When the goods are delivered to carrier, it is deemed delivery to the buyer, if following
conditions are satisfied.
1. The seller delivers the same goods as per the contract.
2. The buyer has informed the carrier name, address and the goods required to be delivered.
3. The seller delivers the goods for the purpose of delivery.
 BUYER’S RIGHTS AGAINST THE SELLER

• Suit for damages for non delivery

• Suit for specific performance
• Suit for breach of warranty
• Right to repudiate the contract
• Suit for interest
• Sale by non-owners
• Sale by mercantile agent (agent of seller) in following cases,
1. The agent must be in possession of goods
2. The agent has sold the goods in ordinary course of business
3. The buyer has acted in good faith
4. The buyer has no knowledge that the seller had no authority to sell.
• Sale by one of joint owners
• Sale by person in possession under voidable contract
• Sale by seller in possession after sale
• Sale by unpaid seller
• Sale by liquidator
• Sale by finder of goods
• Sale by pledgee
DELIVERY OF GOODS IN CONTRACT BY SEA
ROUTE
• CIF Contract
• FOB Contract
• Ex-ship contract
AUCTION SALE