THE SALES OF GOODS ACT, 1930

INTRODUCTION
Sales of Goods Act, 1930 The Act extends to the whole of India, except Jammu & Kashmir. It shall come into force on the 1st day of July, 1930

THE CONTRACT

OF

SALE

A contract of sale of goods is a contract whereby a seller transfers or agrees to transfer the property in goods to the buyer for price [Sec. 4(1)] A contract of sale may be absolute or conditional. 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.

ESSENTIALS OF A VALID SALE

Two parties: There must be 2 distinct parties i.e., a buyer and a seller

Goods: Goods which form the subject matter of the contract of sale must be movable. Price: The consideration for the contract of sale, called price, must be money

Essential elements of a valid contract: A contract is made by an offer to buy or sell goods for a price and the acceptance of such offer.

SALE AND AGREEMENT TO SELL

Property

in the goods is transferred from the seller to the buyer- Sale

of the property in the goods is to be taken place at some future date or after fulfillment of some condition, -AGREEMENT TO SALE

Transfer

SALE AND AGREEMENT TO SELL DISTINCTION

Distinction
Nature of contract Passing of property Nature of rights of buyer Rights of buyer in case of breach Risk of loss Rights of seller in case of breach Right to resell

Sale
Executed Immediate jus in rem recovery of goods, specific performance buyers suit for the price of goods not available

Agreement to Sell
Executory Future jus in personam damages sellers damages may resale but liable for damages

SALE AND AGREEMENT

Distinction
Insolvency of seller

TO

SELL DISTINCTION CONT.

Agreement to Sell
if price already paid proportionate amount can be recovered seller can refuse delivery until he is paid for

Sale
buyer can recover goods if price is not paid proportionate amount can be recovered. Delivery of goods can be demanded

Insolvency of buyer

GOODS
Goods

means 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 part of the land which are agreed to be severed before sale or under contract of sale. [Sec. 2(7)]

SUBJECT MATTER SALE-SEC.6

OF CONTRACT OF

GOODS

Existing Goods

Specific Goods
Ascertained Goods

Future Goods

Contingent Goods

Un ascertained Goods

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. [Sec.12(2)]

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 goods and treat the contract as repudiated or broken. [Sec. 12(3)]

CONDITION & WARRANTY DISTINGUISHED

Condition
Stipulation essential to the main purpose of the contract In case of breach, the aggrieved party can repudiate the contract Breach of condition may be treated as a breach of warranty

Warranty
Stipulation collateral to the main purpose of the contract. Aggrieved party can claim damages only Breach of warranty, cannot be treated as a breach of condition

WHEN CONDITION IS TO BE TREATED WARRANTY [SEC.13(1)-13(3)]

AS

Voluntary waiver of condition the buyer waive the condition or elect to treat the breach of the condition as a breach of warranty Acceptance of goods by buyer where the contract is not severable

IMPLIED CONDITIONS
Condition as to title[Sec.14( a)] seller has the right to sell. Sale by description (Sec.15)- goods shall correspond with the description. Condition as to quality or fitness [Sec16( 1)] Condition as to merchantability [Sec.16( 2)] Condition implied by custom- fitness for a particular purpose may be annexed by the usage of trade [Sec.16(3)] Sale by sample(Sec.17)

CONDITION

AS TO TITLE

In a contract of sale, unless the situation of the contract are such as to show a different intention, there is an implied condition on part of the seller that In sale, he has right to sell goods. In agreement to sell, he will have a right to sell at the time when property is to pass.

SALE

BY

DESCRIPTION

In sale by description there is an implied condition that the goods shall correspond with description.
This means if you contract to sell peas, you cannot oblige the party to take beans. Hence if the description of the article tendered is different then the buyer may not buy the goods.

SALE

BY

DESCRIPTION

AND

SAMPLE

If the sale is by sample as well as by description, it is not sufficient that the bulk of goods corresponds with the sample, if the goods do not also correspond with the description.

This means goods must match with the description and sample.

CONDITION

AS TO

QUALITY

OR

FITNESS

Normally, in a contract of sale there is no implied condition as to quality or fitness for particular purpose.

The buyer must test the goods before he buys them in order to satisfy him self that the goods shall be suitable for him.

CONDITION OF MERCHANTABILITY

Where goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods are of merchantable quality.
This means goods should be such that they are commercially saleable, as per the description by which they are known in the market at their full value.

CONDITION IMPLIED

BY

CUSTOM

An implied condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. This means that the goods which are required may be ascertained from the acts and from the nature of description of that article.

SALE

BY

SAMPLE

1.

2.

3.

A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect. That bulk shall correspond with the sample in quality, That the buyer shall have a reasonable opportunity of comparing the bulk with the sample. That the goods shall be free from any defects, rendering them un merchantable.

CONDITION AS TO WHOLESOMENESS
In

the case of eatables and provisions, in addition to the implied condition as to merchantability, there is another implied condition that the goods shall be wholesome.

IMPLIED WARRANTIES
Warranty of quiet possession [Sec. 14(b)] Warranty of freedom from encumbrances. [Sec. 14(c)] Warranty as to quality or fitness by usage or trade. [Sec. 16(4)] Warranty to disclose dangerous nature of goods

WARRANTY OF QUIET POSSESSION

In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quite possession of the goods. If the buyer is in any way disturbed in the enjoyment of the goods in consequence of the sellers defective title to sell, he can claim damages from the seller.

WARRANTY OF FREEDOM FROM ENCUMBRANCES

In addition to the previous warranty, the buyer is entitled to a further warranty that the goods are not subject to any charge or right in favor of a third party. If the possession is in any way disturbed by reason of the existence of any charge or encumbrances on the goods in favor of any third party, he shall have a right to claim damages for breach of this warranty.

WARRANTY AS TO QUALITY BY USAGE OF TRADE

OR

FITNESS

An

implied warranty as to quality or fitness for a particular purpose may be annexed by the usage of trade.

WARRANTY TO DISCLOSE DANGEROUS NATURE OF GOODS

When a person sells goods knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable danger, other wise he will be liable in damages.

CAVEAT EMPTOR
Let the Buyer Beware The maxim Caveat Emptor does not apply & the contract will be subject to the implied conditions under the following circumstances : 1. Sale under fitness for buyers purpose 2. Sale under merchantable quality 3. Sale under usage of trade 4. Consent by Fraud

WHEN DOES THE PROPERTY PASS FROM SELLER TO THE BUYER? (SEC.18-25)

Specific or Ascertained Goods Generic, Unascertained or Future Goods

WHEN DOES

SELLER TO THE BUYER?

THE PROPERTY PASS FROM

1) Specific goods in Deliverable State (Sec.20) Goods are said to be in deliverable state when they are in such state that the buyer would under the contract be bound to take delivery of them 2) Specific goods not in a Deliverable state (Sec.21) Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test or to do some other thing with reference to them, for ascertaining the price , the property does not pass till such act or thing is done and the buyer has notice of it.

WHEN DOES

SELLER TO THE BUYER?

THE PROPERTY PASS FROM

Unascertained or future goods (Sec.18) Goods must be ascertained [Sec. 18] Goods must be un-conditionally appropriated [Sec. 23] Sale On Approval or Sale or Return basis (Sec.24) When he signifies his approval or acceptance to the seller or does any other act, adopting the transaction If he does not signify his approval or acceptance to the seller but retains the goods w/o giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed on the expiration of a reasonable time.

RISK PRIMA FACIE PASSES WITH PROPERTY [SEC. 26]

unless otherwise agreed, the goods remain at the sellers risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyers risk whether delivery has been made or not. Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.

EXCEPTION

TO THE

RULE

Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault; Where parties agree that the risk will pass at a time different from the time when ownership passes.

NEMO DAT

QUOD NON HABET

[SEC. 27-30]

No one can give that which he possess not. where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title than the seller had [Sec.27] The seller cannot give to the buyer of the goods a better title to the goods than he himself has. Example :- A sells goods to B acquired by theft, C, a real
owner of the goods finds goods in possession of B. Now B has no title to the goods as A was not the owner and had no title to sell the goods. Therefore, B will be liable to return the goods to C, the real owner.

EXCEPTIONS TO THE RULE

Sale by mercantile agent (Sec.27) Sale by a joint owner/co-owner (Sec.28) Sale by a person in possession under a voidable contract (Sec.29) Sale by a seller in possession of goods after sale (Sec.30) Sale by a buyer in possession of goods Sale by an unpaid seller (Sec.54)

PERFORMANCE

OF THE CONTRACT Delivery of goods Actual delivery Symbolic or constructive delivery Rules for Delivery of goods Delivery and payment Delivery to be made to buyer Part delivery Buyer to apply for delivery Mode of delivery Place of delivery Time of delivery Demand at reasonable hour Expenses Installment delivery Goods in possession of third party

DELIVERY (SEC.2[2])

Voluntary transfer of possession of goods from one person to another

1) Physical or Actual Delivery: Physical possession of the good is handed over by the seller to the buyer 2) Constructive Delivery: When a third person who is in possession of the goods acknowledges that he holds the goods on behalf of the buyer Symbolic Delivery: Delivery is made by indicating or giving a symbol e.g: Handing over the key of a godown to the buyer

RULES

AS TO

DELIVERY (SEC.39)

Mode of delivery Delivery & payment Effect of part delivery Buyer to apply for delivery Place of delivery Goods in possession of a third party Time of delivery Expense of delivery Installment delivery Delivery to a carrier or wharfinger

UNPAID SELLER (SEC.45)

A seller is deemed to be an unpaid seller when: 1) The whole of the price has not been paid or tendered 2) A bill of exchange or other negotiable instrument has been received as a conditional payment & the condition on which it was received has not been fulfilled by reason of dishonor of the instrument

RIGHTS

OF AN

UNPAID SELLER

Where property in goods has passed to the buyer 1) Right against goods: a) Lien on goods b) A right of stoppage-in-transit c) A right of Re-sale

LIEN ON GOODS (SEC.47-49)

i) the goods are not sold on credit ii) the goods have been sold on credit, but the period of credit has expired iii) the buyer becomes insolvent

RIGHT OF STOPPAGE IN TRANSIT (SEC.5052)

Transit :- when goods are in the hands of a middle man, goods are said to be in transit. If goods are delivered to the carrier or other bailee by the seller the transit is commenced and it comes to an end when the buyer acquires possession thereof. Essentials :The seller must be unpaid wholly or partly; The buyer must have become insolvent; The goods must be in transit, eg. the seller must have parted with the possession of the goods and the buyer must not have received the goods.

WHEN IS RIGHT OF STOPPAGE IN TRANSIT LOST?

Upon delivery of the goods; Carrier acknowledges to buyer that he holds goods on his behalf; Carrier wrongfully refuses to deliver; or Where part delivery has been made

RIGHT

OF

RE-SALE (SECTION 54)

Where goods are of perishable nature; Where the seller gives notice to the buyer of his intention to resell and the buyer does not pay within a reasonable time after notice; Where the seller has expressly reserved his right of re-sale in case the buyer makes default

RIGHTS

OF AN

UNPAID SELLER

Where property in goods has not passed to the buyer Right of withholding delivery. Seller reserves the right of disposal over the goods (Section 25).

RIGHTS OF AN UNPAID SELLER AGAINST THE BUYER PERSONALLY

Suit for price (Sec.55) Suit for damages for Non Acceptance (Sec.56) Suit for damages for Breach of contract Suit for Interest (Sec.61)

BREACH OF CONTRACT
Remedies Available to the Seller Suit for Price (Section 55) If the buyer neglects or refuses to pay as per terms of contract, seller may sue him for the price of the goods. Suit for Damages (i) For non-acceptance: (Sec. 56) Where buyer wrongfully neglects or refuses to accept and pay, the seller may sue for damages for nonacceptance.

(ii) For repudiation of contract Anticipatory breach: (Sec.60) If buyer repudiates contract before date of delivery, seller may either treat it as: Subsisting and wait till delivery date, or he may treat the contract as rescinded and sue for damages for the breach. This remedy is in anticipation of the breach of contract popularly known as anticipatory breach of contract.

TO THE BUYER Suit for damages for non-delivery of the goods (Section 57). Suit for specific performance (Section 58). Suit for breach of warranty (Section 59). Suit for repudiation of the contract Anticipatory breach (Section 60).

REMEDIES AVAILABLE