SALE OF GOODS ACT1930

A BRIEF INTRODUCTION

AGENDA
Definition
Difference b/w Sale & Agreement to Sale

Difference b/w Sale & Higher Purchase Agreement Definition of Goods

Define Condition & Warranty
Difference b/w Condition & Warranty

Unpaid Seller Rights of Unpaid Seller Caveat Emptor Nemo Dat Quod Non Habet: Sale by non Owner

DEFINITION
According to Section 4 of Sale of Goods Act 1930: A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for price"

Essentials of Contract of Sale

1. There must be at least two parties 2. Transfer or Agreement to transfer the ownership of goods. 3. The subject matter of the contract must necessarily be 'goods'. 4. The consideration is Price. 5. A Contract of sale may be absolute or conditional 6. All other essentials of a valid contract must be present.

SALE V/S AGREEMENT TO SELL

Definition
o It is a contract where the ownership in the goods is transferred by seller to the buyer immediately at the conclusion contract. Thus, strictly speaking, sale takes place when there is a transfer of property in goods from the seller to the buyer. A sale is an executed contract.

o It is a contract of sale where the transfer of property in goods is to take place at a future date or subject to some condition thereafter to be fulfilled.

SALE V/S AGREEMENT TO SELL

Sale 1. A sale is an executed contract. 2. In a sale, since the property has passed to the buyer, the seller can sue the buyer for the price of the goods. 3. A sale creates a right in rem. 4. In case of loss of goods, the loss will fall on the buyer, even though the goods are in the possession of the seller. It is because 'Risk' is associated with ownership. 4. In case buyer pays the price and the seller thereafter becomes an insolvent, the buyer can claim the goods from the Official Receiver or Assignee. 6. If the buyer becomes an insolvent without paying the price, the ownership having passed to the buyer, the seller shall have to deliver the goods to the Official Assignee or Receiver except where he has a lien over the goods. 1. 2. 3. 4. Agreement to sell An Agreement to sell is an executory contract. In an agreement to sell, in case of breach, the seller can only sue for damages, unless the price was payable at a stated date. An agreement to sell creates a right in personam. The loss in this case shall be borne by the seller, even though the goods are in the possession of the buyer. In these circumstances, the buyer cannot claim the goods but only a rateable dividend for the money paid. In these circumstances, the seller can refuse to deliver the goods to the Official Assignee or Receiver.

1. 2.

SALE & HIGHER PURCHASE AGREEMENT

It is an agreement for hire, with an option to purchase. The hirer, under this agreement, is required to pay every month a particular sum of money, and if he pays in that way for a fixed number of months, the hirer will become the owner of the goods on the payment of the last instalment. But, if the hirer fails to pay any particular instalment, the owner can terminate the contract and take away the goods, because the ownership continues to remain in the owner. A "Hire-purchase agreement" is distinct from "Sale" in which price is payable by instalments A 'Hire-purchase agreement,' does not result in passing of the property unless the option to purchase is exercised, usually by payment of all the instalments. Till such time, it constitutes bailment.

ln case of sale, the property passes as soon as sale is made though price has not been fully paid.

GOODS
'Goods' means every kind of moveable property and includes stock and shares, growing crops, grass, and things attached to or forming part of the land but which are agreed to be severed before sale or under the contract of sale.
It excludes money and actionable claims i.e. Debt It also includes Air, Gas, Water, Electricity as well as Patent, Trade mark, Copyrights Etc,

CLASSIFICATION OF GOODS
1. Existing Goods - Existing goods are those, which are owned or possessed by the seller at the time of the contract. Instances of sale of goods possessed but not owned by the sellers fire sales by agents and pledgees. Existing goods may be either: (a) Specific and Ascertained - goods identified and agreed upon at the time a contract of sale is made; or (b) Generic and Unascertained - goods arc goods indicated by description and not specifically identified. 2. Future Goods - Future goods" means goods to be manufactured or produced or acquired by the seller after making the contract of sale. 3. Contingent Goods - 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.

CONDITION & WARRANTY

In a contract of sale, parties make certain stipulations, i.e., agree to certain terms. Some of them may be intended by the parties to be of a fundamental nature, e.g., quality of the goods to be supplied. The stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. Such stipulations are known as Conditions. In contrast, some may be intended by the parties to be binding, but of a subsidiary or inferior character, e.g., time of payment. Thus, 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. Here the stipulations are known as `warranties'.

CONDITION V/S WARRANTY

Warranty 1. A condition is a stipulation (in a 1. A warranty is a stipulation, which is contract), which is essential to the only collateral or subsidiary to the main purpose of the contract. main purpose of the contract. 2. A breach of condition gives the 2. A breach of warranty gives only aggrieved party a right to the right to sue for damages. The repudiate the contract as well as contract cannot be repudiated. the right to sue for damages. 3. A breach of warranty cannot be treated as a breach of condition. 3. A breach of condition may be treated as a breach of warranty in certain circumstances. Under the following circumstances a breach of condition is to be treated as a breach of warranty, i.e., the right to repudiate the contract is deemed to have been lost: 1. Waiver of Condition 2. Compulsory treatment of breach of condition as breach of Warranty.

Condition

UNPAID SELLER
An unpaid seller of goods is a person who has not been paid the whole of the price or to whom the whole of the price has not been tendered. The term "seller" includes an agent of the seller.

RIGHTS OF AN UNPAID SELLER

1. Rights against goods An unpaid seller has the following rights against the goods: (a) Lien on the goods (b) A right of stoppage in transit (c) A right of re-sale 2. Rights Against the Buyer Personally An unpaid seller, besides his rights against goods, has the following rights against the buyer personally: (i) Right to sue for the price; and (ii) the right to sue the buyer for damages for nonacceptance.

DOCTRINE OF CAVEAT EMPTOR

Caveat Emptor is a fundamental principle of the law of sale of goods. It means "Caution Buyer", i.e. "Let the buyer beware". In other words, it is not the duty of the seller's duty to point out defects of his own goods. The buyer must inspect the goods to find out if they will suit his purpose. Example Pigs were sold "subject to all faults", and these pigs, being infected, caused typhoid to other healthy pigs of the buyer, it was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of the law being 'Caveat Emptor'. [Goddard v. Hobbs 1878, 4 App. Cas. 13].

EXCEPTIONS
Where the seller makes a false representation and buyer relies on that representation. The rule of "Caveat Emptor" will not apply and the buyer will be entitled to the goods according to that representation; Where the seller actively conceals a defect in the goods, so that on a reasonable examination the same could not be discovered; Where the buyer makes known to the seller the purpose for which he is buying the goods, and the seller happens to be a person whose business is to sell goods of that description, then there is an implied condition that the goods shall be reasonably fit for such purpose. The rule of Caveat Emptor will not apply; In case of sale by description, there is implied condition as to their being of merchantable quality. However, if the buyer has examined the goods, this condition of "merchantability" extends only to hidden or latent defects. The defects, which such examination ought to have revealed, are not covered, i.e., the rule of Caveat Emptor will be applicable.

NEMO DAT QUOD NON HABET

(TRANSFER OF TITLE BY NON-OWNERS )

The general rule is that only the owner of goods can transfer a good title. No one can give a better title than he himself has. This rule is expressed by the maxim "Nemo dat quod non habet" which means "that no one can give what he himself has not" Ex A finds a ring of B and sells it to a third person who purchases it for value and in good faith. The true owner, i.e., B can recover from that person, for A having no title could pass none the better. Faruquaharson v. King (1902) A.C. 324.).

EXCEPTION
Sale by Mercantile Agent Sale by a Joint-owner Sale by a Person in Possession under a Voidable Contract Sale by the Seller in Possession of Goods after Sale Where a seller having sold goods, continues in possession thereof or of documents or title to the goods, such seller will pass a good title to the (second) buyer, if that buyer has acted in good faith and without notice of the previous sale. Sale by an unpaid seller - a seller who has exercised his right of lien or stoppage in transit can, resell the goods and convey a valid title to another buyer, though no notice of re-sale has been given to the original buyer.

DUTIES
Duty of the seller To deliver the goods, in accordance with the terms of the contract of sale. Delivery and payment of price are concurrent conditions. The seller of goods has the duty of giving delivery according to the terms of the contract. Duty of the buyer Pay for the goods; Accept delivery; and Pay compensation to the seller in case he wrongfully refuses to accept delivery.