SALE OF GOODS ACT - IMPORTANT POINTS

TO REMEMBER
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1. CONTRACT OF SALES = Sell OR Agreement to sell

2. Sale of goods Act is applicable for sale or buy of movable goods only and
NOT immovable goods.

3. Buyer = a person buys or agrees to buy

4. Seller = a person who sells or agrees to sell

5. Goods = movable goods. It includes – stock and shares, growing crops,

grass, any thing attached to earth BUT can be separated without losing
the features of the goods. It excludes- actionable claims and money.

6. Existing goods = Goods are in existence AT THE TIME OF THE CONTRACT

OF SALE

7. Future goods = goods to be manufactured or acquired by the seller AFTER

THE CONTRACT OF SALE.

8. Specific goods = Goods INDENTIFIED and AGREED upon AT THE TIME OF

THE CONTRACT OF SALE.

9. Unascertained goods = Goods described by description or sample only AT

THE TIME OF CONTRACT

10.Ascertained goods = Goods identified only AFTER THE FORMATION OF THE

CONTRACT OF SALE.

11.Goods in “deliverable state” = goods in a condition in which buyer would

be bound to take the delivery.

12.Delivery = voluntary transfer of possession

13.Actual Delivery = Goods are physically delivered

14.Constructive delivery = delivery by acknowledgement

15.Symbolic delivery = delivery represented by token

16.“Document of title of goods” = document used in the ordinary course of

business as proof of the possession. THE POSSESSOR OF THE DOCUMENT
CAN RECEIVE THE GOODS BASED ON THAT DOCUMENT
 17.“Document showing title” = THE POSSESSOR OF THE DOCUMENT CANNOT
RECEIVE THE GOODS BASED ON THAT DOCUMENT (example; share
certificate)

18.Mercantile Agent: an agent having authority to sell or consign the goods or

to buy the goods etc.

19.Property = Right of ownership (also known as “general property”)

20.Insolvent = a person ceased to pay his debts or cannot pay IN THE

ORDINARY COURSE OF BUSINESS

21.Essentials of “Contract of Sale” = (a) at least two parties (b) subject

matter must be goods (as defined in Sale of Goods Act) (c) price is money
(NOT MONEY-KIND; however, a portion of price may be money-kind) (d)
transfer of property from seller to buyer (e) Absolute or conditional (f)
other essential elements of a valid contract.

22.Sale = ownership of goods gets transferred IMMEDIATELY.

23.Agreement to sale = Ownership DOES NOT get transferred

24.Difference between Sale & Agreement to sale:

Parameter Sale Agreemen

s t to sale
Risk passes Immediately along with the Passes at a
ownership later date
Nature Executed contract Executory
contract
Suing right For price Normally,
with seller damages
Subsequent With buyer With seller
liability
Suing right Damages against the seller & Damages
with buyer recovery of goods from third only
parties who bought the goods

25.Difference between Sale and Hire Purchase:

Parameter Sale Hire Purchase

s
Transfer of Immediately Upon payment of last instalment
property
Position of the Like owner Like bailee
buyer
Termination of Buyer cannot terminate Hirer can terminate, return the
contract & has to pay the price goods; no liability to pay future
instalment
Risk borne by Seller No such risk
Passing of title Buyer can pass the title Hirer can not pass
Tax Levied at the time of Not leviable until it becomes sale
 contract

26.Difference between bailment and sale:

Parameters Sale Bailment

Transfer of Transfer No transfer of property; only property
property happens
Return of goods Not possible Yes, once the purpose of the bailment is
completed
Consideration Price May be gratuitous or non-gratuitous

27.Contract for work and labour = No goods are sold and there is only doing
or rendering of some work of labour.

28.No particular form of contract is necessary.

29.Subject matter of contract must be goods.

30.Contract of sale when goods is not existing, is void ab initio.

31.Goods perishing after the contract is made, before risk passes to the buyer
– Contract is void.

32.A condition is essential to the main purpose of the contract whereas,

warranty is just a collateral contract.

33.If condition is breached, the aggrieved party can claim = repudiate the
contract, claim damages or both

34.If warranty is breached, the aggrieved party can claim = damages only

35.A breached of condition may be treated as breach of warranty whereas;

breach of warranty cannot be treated as breach of condition.

36.A condition may be treated as warranty = buyer waives the performance

of the condition / buyer elects so / in case of non-severable contract the
buyer either has accepted the whole goods or any part thereof / fulfilment
of any condition or warranty is excused by law

37.An implied condition may be negated or waived by an express agreement.

38.Implied conditions = Condition as title / sale by description / sale by

sample / sale by sample as well as description / Condition as to quality or
fitness / Conditions as to wholesomeness

39.Implied warranty = warranty as to undisturbed possession / Warranty as

to non-existence of encumbrances / Disclosure of dangerous nature of
goods / warranty as to quality or fitness by usage of trade.
40.“Caveat Emptor” = Let the buyer beware (Students are advised to read
and understand the exceptions of this rule from the Module of ICAI; page
No 92)

41.Passing of property implies passing of property. Property passes ONLY

when goods are ascertained.

42.Deliverable State = a state that the buyer would under the contract be
bound to take the delivery of the goods.

43.Appropriation of goods means = selection of goods with the mutual

consent of the seller and the buyer.

44.Appropriated goods should be as per the description in the contract and in

the deliverable state.

45.Appropriation should be unconditional.

46.Appropriation must be made by the seller with the assent of the buyer or
by the buyer with the assent of the seller. The assent may be given either
before or after appropriation.

47.Further, appropriation may be express or implied

48.Passing of property of SPECIFIC GOODS = Property SHALL NOT pass when

the goods are made in deliverable state BUT SHALL PASS ONLY when the
buyer has notice of it.

49.Passing of property of Unascertained goods = goods have to be

ascertained and there is unconditional appropriation.

50.A seller is deemed to have unconditionally appropriated, where he delivers

the goods to the buyer or to a carrier or other for the purpose of
transmission to the buyer.

51.In case of goods sent on approval or “sale or return” basis, property

passes to the buyer when = buyer signifies approval or acceptance to the
seller / when he does any act adopting the transaction and / if he does not
signify his approval or acceptance to the seller but retains goods beyond a
reasonable time.

52.Generally, risk passes to the buyer when property is transferred. However,

where delivery of the goods has been delayed through the fault of either
buyer or seller, the goods are at risk of the party in fault as regards any
loss which not have occurred but for such fault.

53.“Nemo dat quod non habet” means = no one can give what he has not
got.

54.Exceptions to the rule “Nemo dat quod non habet”:- Sale by mercantile
agent / Sale by one of the joint owners / sale by a person in possession
under a voidable contract / sale by one who has already sold the goods
 but continues in possession thereof / sale by buyer obtaining possession
before the property in the goods has vested in him / effect of estoppels/
Sale by unpaid seller / sale under the provisions of other acts.

55.An unpaid seller is the seller when whole of the price has not been paid or
tendered and the seller had immediate right of action for the price OR a
bill of exchange or other negotiable instrument was given as payment was
an absolute and not a conditional payment.

56.An unpaid seller has the rights = Right of lien / Right of stoppage in transit
/ right of re-sale / suit for price / suit for damages for non-acceptance /
Repudiation of contract before due date / suit for interest.

57.Right of lien may be in the case if the buyer becomes insolvent or in other
cases BUT Right of Stoppage in transit can be exercised ONLY if the buyer
has become insolvent and NOT IN OTHER CASES.

58.In case of breach of contract, Buyer has the right against the seller = Suit
for non-delivery / Suit for specific performance / suit for damages for
breach of warranty / suit for recovery of price

59.In case of breach of contract, Seller has the right against the buyer = Suit
for price and Damages for non-performance.

60.The auction sale is complete when the auctioneer announces its

completion by the fall of hammer or any other customary manner.

INDIAN PARTNERSHIP ACT-IMPORTANT POINTS TO

REMEMBER

61.Indian Partnership act was enacted in 1932.

62.Essential elements of partnership = Agreement between two or more

parties / must be to share the profit / the business must be carried on by
all or any of them acting for all.

63.There CANNOT be partnership where there is no intention to carry on the

business and to share the profit thereof.

64.HOWEVER, an agreement to share losses is not an essential element. (If

there loss share agreement is not present then, losses must be borne on
the profit sharing ratio.

65.Sharing of profit is ONLY prima facie evidence.

66.“Business must be carried on by all the partners or by anyone or more of

the partners acting for all” is CARDINAL PRINCIPAL OF THE PARTNERSHIP.
 This is also known of “Mutual agency” which is a TRUE TEST OF
PARTNERSHIP.

67.The nature of the partnership is voluntary and contractual.

68.Difference between partnership and Joint Stock Company:

Parameter Partnership Joint Stock Company

s
Personality Not legal entity Legal entity
Agency Every partner is like agent Members are not agent
Distribution of Distributed among partners Not necessary
profits
Extent of Unlimited Limited
liability
Transfer of Not transferable Transferable normally
share
Management Partners manage Not compulsorily managed by
members
Number of Not exceed 20 in normal Private company max 50 & min
membership business and 10 in banking 2, public company min 7 & max
business no limit

69.A club does not have objective of carrying business. A member or club is
not the agent of other members like in partnership. A member of a club
has no interest in the property of the club as a partner has in the property
of the firm.

Parameter Partnership HUF

s
Creation By agreement By status
Death Normally, dissolution No dissolution
Management Karta Every partner
liability Unlimited Only Karta’s liability is
unlimited
Calling for Partner can bring a suit (if he seeks Member not entitled
accounts dissolution)
Governing law Partnership act Hindu law
Minor’s Minor cannot become partner A minor can be member
capacity
Continuity Dissolved by death or insolvency of Till it is divided
a partner

70.An active partner becomes a partner by agreement, actively participates

in conduct of the partnership.

71.A sleeping partner/ dormant partner does not take an active part in the
conduct of the business.

72.A nominal partner just lends his name to the firm without any real interest
in it.
73.Partnership by holding out = partnership by estoppel

74.A sub-partnership may arise when, consequent upon an agreement

between a partner in a firm and a stranger, the latter is vested with
interest jointly with that partner so far as his share in the firm is
concerned.

75.A minor partner is eligible for = agreed share in profits, can have access
to, inspect and copy the accounts of the firm, can sue the partner for
accounts or for payment of his share (CAN SUE ONLY WHEN SEVERING HIS
CONNECTION WITH THE FIRM AND NOT OTHERWISE), on attaining majority
he may within 6 months elect to become a partner or not to become a
partner.

76.The minor’s share is liable for the acts of the firm (NO PERSONAL
LIABILITY)

77.Every partner has the right to take part in the business of the firm.

78.Where any difference arises between the partners with regard to the
BUSINESS OF THE FIRM, it shall be determined by the views of the
MAJORITY OF THEM.

79.NO CHANGE IN THE NATURE OF THE BUSINESS OF THE FIRM can be made
without the consent of all the partners.

80.Every partner is entitled to have access to any of the books of the firm and
to inspect and take out copy thereof.

81.In normal circumstances, no partner is entitled to receive any

remuneration in addition to his share in the profits of the firm for taking
part in the business of the firm.

82.Partners have right to share the profits.

83.There is NO connection between the proportion of sharing profits and

proportion of capital contribution.

84.Normally, interest on capital is NOT allowed. However, it may be allowed if

so given in the deed. But it has to be paid ONLY out of profits.

85.In normal case, in interest rate payable on advance is 6%.

86.Every partner has the right to be indemnified by the firm in respect of

payments made and liabilities incurred by him in the ordinary and proper
conduct of the business of the firm as well as in the performance of an act
in emergency for protecting the firm from any loss.

87.Every partner has the right to prevent the introduction of a new partner in
the firm without the consent of all the existing partners.
88.Every partner can retire with the consent of all the partners (in normal
partnership) & at any time (in case of partnership at will).

89.Every partner has the right NOT to be expelled.

90.A partner has the right to dissolve the partnership with the consent of all
the partners.

91.If a partner carries on business of the SAME NATURE AS AND COMPETING

with that of the firm, then he must account for and pay to firm all profits
made by him in the business. (Provision is subject to the contract between
the partners)

92.When a partnership firm is dissolved every partner has right, in the

absence of any agreement to the contrary, to have the goodwill of
business sold for the benefit of all the partners.

93.If a partner derives any profit for himself from any transaction of the firm
or from the use of the property or business connection of the firm or firm
name, he must account for that profit and pay it to the firm. (Provision is
subject to the contract between the partners)

94.A change in constitution of the firm may take place = admission of a new
partner / death or retirement of a partner / the partnership carries on
business other than the business for which it was originally formed / where
the partnership business is carried on after the expiry of the term fixed for
the purpose.

95.A partner has implied authority = to bind the firm with the act done

96.If a notice is sent to a partner, who normally acts in business of the firm,
on matters relating to the affairs of the firm, operates as notice to the firm
EXCEPT in the case of a fraud on the firm committed by or with the
connivance of that partner.

97.Every partner is liable jointly with other partners also severally for the acts
of the firm done while he is a partner.

98.The firm is liable to the same extent as the partner for any loss or injury
caused to a third party by the wrongful acts of a partner, if they are done
by the partner while acting, in the ordinary course of the business of the
firm and with the authority of the partners.

99.The firm is liable for the losses if a partner receives (with in his apparent
authority) and misapplies money.

100. The liabilities of the new partner ordinarily commence from the date
when he is admitted as partner UNLESS he agrees to be liable for
obligations incurred by the firm prior to the date.
 101. A partner continues to be liable to the third party for the acts of the
firm after his retirement until public notice of his retirement has been
given.

102. A partner MAY NOT be expelled from the firm by a majority of

partners EXCEPT in exercise, in good faith, of powers conferred by
contract between the partners.

103. I a partner is otherwise expelled, the expulsion is NULL AND VOID.

The ONLY remedy, when a partner misconduct in the business of the firm
is to seek judicial dissolution.

104. Ordinarily, in case of insolvency of a partner results in dissolution of

firm (However subject to the provision of the contract)

105. Where under the contract a firm is NOT dissolved by the death of a
partner, the estate of the deceased partner is NOT liable for act of the firm
after his death.

106. There is no compulsion that partnership firm should be registered.

107. If a partnership firm is not registered, the firm or any other person
on its behalf cannot bring an action against the third party for breach of
contract entered into by the firm ALSO, the firm cannot get set off. Even a
partner is precluded from bringing legal action against the firm or any
person.

108. It is not essential that the firm should be registered from the very
beginning.

109. Registration is deemed to be complete as soon an application in the

prescribed form with the prescribed fee and necessary details concerning
the particular of the partnership is delivered to the Registrar.

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