(1) This Act may be called the Sale of Goods Act, 1930.
(2) It extends to the whole of India (except the State of Jammu and Kashmir).
(3) It shall come into force on the 1st day of July, 1930.
Sec. 1, (1)(3),The Sale of Goods Act, 1930
You introduce yourself as a manager and people immediately ask what you sell. The
very concept of business will cease if there is no sale. Sales involve commercial
relationship.
There is exchange of goods and services for money or other assets. Property,
ownership, transfer of ownership, rights and duties of buyers and sellersall of these
bind people to a contract. You as a manager have no other choice but to know this law
well, lest you may experience pitfalls.
In 1893, the British Parliament enacted the Sale of Goods Law after repealing part of
its Contract Law with the purpose of serving the new business realities. Indian Contract
Law, Section 76123, formed the Sale of Goods. To meet the new needs of growing
economy, this chapter on sale of goods was repealed to enact a new law on the same
lines as the British Law. It does not affect the rights, interests, obligations, and titles
acquired or which had already accrued before the enforcement of this Act. Work on the
legislation began as early as 1926 carefully examining the case law making new
provisions.
Case (1) was a landmark one in the new era under Sale of Goods Act, because until
then a lawyer could argue that gas and electricity were not defined as goods. The Law
Commission of India recommended for certain amendments so that it is made
indubitably clear that electrical energy, water, and gas come under the purview of the
definition of goods.
Agreements for the sale of goods are governed by the general principles of the
Contract
Law: offer, acceptance, consideration, communication, competence to contract, free
consent, and the legality of the object. However, these may not be exhaustive enough
to meet some grave challenges in contracts of sale. Hence, the Sale of Goods Act
caters to the needs of,
for instance, conditions and warranties in a contract; when does the ownership of the
goods pass from the seller to the buyer; how does the buyer acquire a good title; fixing
of price; remedies of the buyer if the goods are not delivered to him. All of this is the
scope of the Sale of Goods Act, 1930.
Basic definitions:
Seller person who sells or agrees to sell.
Buyer person who buys or agrees to buy.
Goods All kinds of movable property, except actionable claims.
Sale Where under a contract of sale the property in the goods is transferred from the
seller to the buyer, the contract is called a sale.
Agreement to sale Where 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 contract is called
an
agreement to sell.
Price Consideration for the sale of goods in money. (When the consideration is only in
goods then it is barter and not sale.)
Transfer Transfer of ownership of goods or agreement to that effect.
The Act has found several reviews and amendments to adapt to the new complex
course
of businesses. In 1993, for instance, the Multimodal Transportation of Goods Act was
enacted. As you now study the rest of the chapter you will be introduced to six different
steps to appreciate the practical wisdom enshrined in this Act.
EFFECTS OF THE CONTRACT
Goods must be ascertained 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
sanctioned. Property
passes when intended to pass. (1) 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.
Secs 18 and 19(1), The Sale of
Goods Act, 1930
Secs 1830 of the Sale of Goods Act deal with effects of contract. The essence of the
effect of sale of goods contract is transfer of property from the seller to the buyer.
(3) Where the seller of goods draws on the buyer for the price and transmits to the
buyer the bill
of exchange together with the bill of lading or, as the may be, the railway receipt, to
secure
acceptance to payment of the bill of exchange, the buyer is bound to return the bill of
lading or
the railway receipt if he does not honour the bill of exchange, and, if he wrongfully
retains the
bill of lading or the railway receipt, the property in the goods does not pass to him.
Explanation.In this section, the expression "Railway" and "Railway administration" shall have the
meanings respectively assigned to them under the Indian Railways Act, 1890.
risk passes with property :The owner of goods must bear the loss or damage of
goods unless
otherwise is agreed to. Under Section 26 of the Sale of Goods Act, unless otherwise
agreed, the
goods remain at the sellers risk until property therein has passed to the buyer. After
that event
they are at the buyers risk, whether delivery has been made or not.
Example :
A bids for an antique painting at a sale by auction. After the bid, when the auctioneer
struck his hammer to signify acceptance of the bid, he hit the antique which gets
damaged. The loss will have to be borne by the seller, because the ownership of goods
has not yet passed from the seller to the buyer.
The aforesaid rule is, however, subject to two qualifications:
(i)
If delivery has been delayed by the fault of the seller or the buyer, the goods
shall be at the risk
of the party in default, as regards loss which might not have arisen but for the default.
(ii) The duties and liabilities of the seller or the buyer as bailee of goods for the
other party remain unaffected even when the risk has passed generally.
Example :
A contracted to sell 100 bales of cotton to B to be delivered in February. B took the
delivery of the part of the cotton but made a default in accepting the remaining bales.
Consequently the cotton becomes unfit for use. The loss will have to be borne by the
buyer. It should, however, be remembered that the general rule shall not affect the
duties or liabilities of either seller or buyer as a bailee of goods for the other, even
when the risk has passed.
As noted above, the risk (i.e., the liability to bear the loss in case property is destroyed,
damaged or Deteriorated) passes with ownership. The parties may, however, agree to
the contrary.
For instance, the parties may agree that risk will pass sometime after or before the
property has passed.
Example :
A motor car agent for sale sold the car at a price below the authorized price fixed
by the owner and misappropriated the proceeds. Held, the innocent purchaser
obtained a
good title.
(2)Sale by one of the joint owners:
If one of the several joint owners of goods has the sole possession
of them with the permission of the others, the property in the goods may be transferred
to
any person who buys them from such a joint owner in good faith and does not at the
time of the contract of sale have notice that the seller has no authority to sell
(Section 28).
Example :
A, B, and C are three brothers and joint owners of a T.V and VCR and with the
consent of B and C, the VCR was kept in possession of A. A sells the T.V and VCR to P
who buys it in good faith and without notice that A had no authority to sell. P gets a
good title to VCR and TV.
(2)Sale by a person in possession under a voidable contract:
A buyer would acquire a good title to
the goods sold to him by a seller who had obtained possession of the goods under a
contract
voidable on the ground of coercion, fraud, misrepresentation or undue influence
provided
that the contract had not been rescinded until the time of the sale (Section 29).
Section28. Sale by one of joint owners.If one of several joint owners of goods has the sole possession of them by permission
of the co-owners, the property in the goods in transferred to any person
how buys them of such joint owner in good faith and has not at the time of the contract
of sale notice that the seller has not authority to sell.
Section29. Sale by person in possession under voidable contract.When the seller of gods has
obtained possession thereof under a contract voidable under Section 19 or Section
19A of the Indian Contract Act, 1872, but the contract has not rescinded at the time of
the sale, the buyer acquires a god title to the goods, provided he buys them in good
faith and without notice of the sellers defect of title.
Section30. Seller or buyer in possession after sale.(1) Where a person, having sold goods, continues
or is in possession of the goods or of the documents of title to the goods, the delivery
or transfer by that person or by a mercantile agent acting for him of the gods or
documents of title under anysale, pledge o other disposition thereof to any person
receiving the same in good faith and without notice of the previous sale shall have the
same effect as if the person making the delivery to transfer were expressly authorized
by the owner of the gods to make the same.
(2) Where a person, having bought or agreed to buy goods, obtains with the
consent of the seller, possession of the goods or the documents of title to the
goods, the delivery or transfer by that person or by a mercantile agent acting for
him, of the goods or documents of tile under any sale, pledge or other disposition
thereof to any person receiving the same in good faith and without notice of any
lien or other right of the original seller in respect of the gods shall have effect as if
such lien or right did not exist.
Example :
X, fraudulently obtains a diamond ring from Y. This contract is voidable at the option of
Y. But before the contract could be terminated, X sells the ring to Z, an innocent
purchaser. Z gets the good title and Y cannot recover the ring from Z even if the
contract is subsequently set aside.
(3)Sale by one who has already sold the goods but continues in possession thereof:
If a person has sold goods but continues to be in possession of them or of the
documents of title to them, he may sell them to a third person, and if such person
obtains the delivery thereof in good faith and without notice of the previous sale, he
would have good title to them, although the property in the goods had passed to the
first buyer earlier. A pledge or other disposition of the goods or documents of title by the
seller in possession are equally valid [Section 30(1)].
Example :
During ICL matches, P buys a TV set from R. R agrees to deliver the same to P
after some days. In meanwhile R sells the same to S, at a higher price, who buys in
good
faith and without knowledge about the previous sale. S gets a good title.
(4)Sale by buyer obtaining possession before the property in the goods has vested
in him:
Where a buyer with the consent of the seller obtains possession of the goods before
the property in them has passed to him, he may sell, pledge or otherwise dispose of
the goods to a third person, and if such person obtains delivery of the goods in good
faith and without notice of the lien or other right of the original seller in respect of the
goods, he would get a good title to them
[Section 30(2)].
Example :
A sold to B some antiques and delivered to him a bill of lading for the antiques, with
a bill of exchange for the price of the antiques. The buyer having obtained the bill of
lading endorsed it to another who took it without notice of any objection to the buyers
title. Held, on the buyer subsequently becoming insolvent without payment of price,
that transfer by the buyer of the bill of lading to the sub-purchaser was effective against
the true owner and the latter, therefore, could not stop the goods in transit.
However, a person in possession of goods under a hire-purchase agreement which
gives him only an option to buy is not covered within the section unless it amounts to a
sale.
Example :
A took a car from B on this condition that A would pay a monthly installment of`
500 as hire charges with an option to purchase it by payment of`10,000 in 24
installments. After the payment of few installments. A sold the car to C. B can recover
the car from C since A had neither bought the car, nor had agreed to buy the car. He
had only an option to buy the car.
(5)Effect of Estoppel: Where the owner is estopped by the conduct from denying the
sellers authority to sell, the transferee will get a good title as against the true
owner. But before a good title by estoppel can be made, it must be shown that
the true owner had actively suffered or held out the other person in question as
the true owner or as a person authorized to sell the goods.
(6)Sale by an unpaid seller: Where an unpaid seller who had exercised his right of
lien or stoppage in transit resells the goods, the buyer acquires a good title to the
goods as against the original buyer Section 54 (3).