LAW RELATING TO SALE OF GOODS

SALE OF GOODS ACT, 1930

OVERVIEW
The Sale of Goods Act, 1930 governs the contracts relating to sale of goods or movables. Initially sale of goods was a part of the Contract Act, 1872. Contracts for sale of goods i.e., movable property, are now covered by the provisions of the Sale of Goods Act.

PURPOSE
contract sale of goods is the most common of all business contracts. A basic knowledge of the law governing these contracts is essential for all persons engaged, directly or indirectly, in any business activity, to be aware of rights

CONTRACT OF SALE : A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to a buyer for a price.

Essential elements of a sale :

1. There must be at least two parties(seller & buyer). 2. All essentials of a valid contract must be present.

1. Transfer or Agreement to transfer the ownership of goods.

1. The subject matter of the contract must necessarily be 'goods'. 2. There must be Money consideration known as the price. 3. A Contract of sale may be absolute or conditional.

1.

2.

A Valid Contract : A contract of sale is just like any other contract made under the Contract Act, 1872. Therefore to constitute a valid contract of sale, it should satisfy all the essentials of a valid contract namely, a valid offer & acceptance, free consent of the parties, a valid and lawful consideration, parties must be competent etc. Two parties : To constitute a contract of sale , there must be a transfer or agreement to transfer the property in goods by the seller to the buyer. It means that there must be two persons,
"buyer: means a person who buys or agrees to buy goods; "Seller" : means a person who sells or agrees to sell goods "unpaid seller : means a seller to whom the whole of the price has not been paid or tendered;

Transfer of ownership : To constitute a valid contract of sale, there should be immediate transfer or an agreement to transfer the full ownership of goods sold or agreed to be sold. 4 PRICE : To constitute a valid contract of sale , consideration for transfer must be money. Where there is no money consideration the transaction is not a contract of sale, as for instance goods given in exchange for goods or as remuneration for work or labour.

3.

Formalities in a Contract of Sale No special formalities are required to form a contract of sale; it may be formed like any other contract. No particular form is required to form a contract of sale. It maybe in writing or oral or partly in writing and partly by word of mouth. A contract of sale may also be implied from the conduct of the parties. Therefore, if a written offer to sell goods is accepted verbally on the telephone, it will be a valid contract of sale. So also where goods are also ordered by a letter and the same are supplied without any communication, the contract of sale is implied by the conduct of the parties.

Sale
A contract where, the property in the goods is transferred immediately from the seller to the buyer, the contract is called a sale.

Agreement to Sell
But where the transfer of property in the goods is to take place at a future time, or subject to some conditions, to be fulfilled, it is called an agreement to sell.

Example :
Mr. A sells to Mr. B 100 wheat bags weighing 10 tonnes, lying at his godown. This is an immediate sale, the buyer Mr. B, is free to take up the delivery as and when

Example :
A agrees to sell 10 tonnes of wheat to B at a future date. This is simply an agreement to sell.

What are Goods [Sec 2(7)]

Goods means every kind of movable property other than actionable claims and money

Growing crops, grass, standing trees and other things attached to or forming part of the land, also fall in the meaning of goods. Things like goodwill, patent, copyright, trademark, water, gas, electricity, stocks & shares etc are all regarded as goods and may be bought and sold as such.

An actionable claim means a claim to any debt or any beneficial interest in movable property not in possession, which can be recovered by means of a suit or a action.

Stocks and shares, which too are actionable claims

have been specifically included in the definition of goods.

Classification of Goods
1. 2. 3. 4. 5. Existing goods Specific goods/ Ascertained goods Unascertained or Generic Goods Future goods Contingent goods

1.

Existing Goods Those goods which are owned or possessed by the seller at the time of contract of sale. Example: if A sells his horse to B, believing it to be in existence but in fact the horse is dead, no contract will arise

2. Specific/Ascertained Goods Specific goods means goods identified and agreed upon at the time of a contract of sale. Example e.g. a specified shirt, watch, etc. 3. Unascertained or Generic Goods Goods which are not specifically identified at the time of the contract and are defined only by description are called unascertained goods.

4. Future Goods means goods to be manufactured or produced or acquired by the seller after making the contract of sale. Example: P agrees to sell to Q all the mangoes which will be produced in his garden next year. This is an agreement for the sale of future goods

5. Contingent Goods are the goods the acquisition of which by the seller depends upon a contingency which mayor may not happen. Contingent goods are a part of future goods. i.e, goods which might be expected to come into existence, as (i) goods to arrive (ii) future crops (iii) eggs.

Example if A agrees to sell to B certain goods which shall arrive on a ship, it shall be a case of contingent goods.

What shall be the fate of a contract if the goods are perished or destroyed? Perishing of goods' before making of contract Destruction includes not only complete destruction of the goods when the seller has been forever deprived of the goods or when the goods have been stolen or have in some other way been Destruction After the Agreement to Sell but un lost and are untraceable, but also when the goods becomebefore Sale merchantable i.e. when the goods has lost their commercial value.

Destructtion before making of contract Where in a contract for sale of specific goods, at the time of making the contract, the goods, without knowledge of the seller, have perished or become so damaged as no longer to answer to their description in the contract or have ceased to exist the contract shall become null and void.

Which rule?

Example: A agrees to sell B, a specific cargo supposed to be on its way from Dubai to Karachi. It turns that before the day of the bargain the ship carrying the cargo & the goods were lost. Neither party was aware of the facts. The agreement is void.

Goods perishing before sale but after agreement to sell Where the goods are in existence at the time of making the contract but perish without the fault of either party before ownership or risk has passed to the buyer.

Example: A agrees to buy a horse from B upon a condition that the horse would be taken away by A and tried by him for 8 days, and returned at the end of the 8 days if A did not think it is suitable for his purposes. The horse was placed in As stable, died on the 4th day , without fault of either party. B cannot maintain an action for price.

DOCUMENTS OF TITLE TO GOODS

Proof of the ownership, possession or control of goods. It authorises the possessor to receive the goods,claim for goods, resale of goods etc. Cash memo, bill of lading, dock warrant, warehouse keeper's or wharfinger's certificate, lorry receipt (L/R), railway receipt (R/R) and delivery order are some of the instances of document of title to goods.